National currency enters another zone of turbulence
Last week, our currency market suddenly went into a fever: after a noticeable weakening of the ruble by almost 9% on August 14, by the 16th its rate «rebounded» almost to the previous level. Some analysts assume that the domestic currency lost its positions under the influence of military events in the Kursk region, but there are experts who believe that geopolitics has nothing to do with it. What are the reasons for the destabilization of the national currency exchange rate and whether we should expect the dollar to reach 100 rubles in the near future? MK found out from Maxim Osadchy, head of the analytical department of BKF Bank.
— The press release of the Central Bank of the Russian Federation dated August 9 stated that the ruble fluctuated in a moderate range against major foreign currencies, having decreased slightly by the end of the month, and spreads (the difference between the selling price and the buying price – «MK».) for the purchase and sale of foreign currency in cash by the end of the month fell to the level of January-May 2024. However, the next day, August 10, the situation began to change radically. The ruble devalued sharply from 86.56 rubles per dollar on August 8 to 92.66 rubles per unit of American currency on August 14, and spreads for the purchase and sale of foreign currency in cash increased. But already on Wednesday, August 15, a correction began: in a couple of days, the ruble strengthened to 88.8 rubles per dollar. The last time similar destabilization occurred was after the introduction of sanctions against the Moscow Exchange on June 12, when a currency “mini-crisis” occurred, caused by the cessation of exchange trading in dollars and euros.
— The first thing that comes to mind is the events in the Kursk region that began on August 6. However, a logical error cannot be ruled out: after this does not mean because of this. If panic sentiments had arisen, they would have spread from the foreign exchange market to the stock market, which was not observed after the shock of August 6: the Moscow Exchange index fluctuated mainly in the range of 2800 — 2900. It does not happen that the foreign exchange market is gripped by panic sentiments due to geopolitical shock, but the stock market is quiet and quiet, so we need to look for some other reasons.
— There are two most likely. The first possible reason: a large currency buyer entered the market – a resident who bought yuan for several billion dollars, and a deficit of yuan liquidity arose on the exchange. We have observed a similar reason for the sharp weakening of the ruble many times. The most famous example of such a scenario is the currency crisis of December 2014, which was caused by the actions of one well-known raw materials exporter who bought several billion dollars at one time. The second reason is the acceleration of the exit of foreigners from Russian assets. The fact is that OFAC (Office of Foreign Assets Control, a division of the US Treasury Department responsible for law enforcement in the area of sanctions – «MK») On June 12, it added the Moscow Exchange and its group, the National Clearing Center (NCC) and the National Settlement Depository (NSD), to the sanctions list and issued a license to wind down operations with them until August 13. On August 2, OFAC extended the license to wind down operations with the Moscow Exchange, NCC, and NSD until October 12. However, foreign investors could have rushed to withdraw their funds from Russia before August 13.
The purchase by non-residents of Russians of blocked foreign securities using money from type C accounts for a total amount of 8.1 billion rubles could also have played a role. These funds should have arrived in the accounts of brokers, trustees, and management companies of mutual investment funds by August 13 inclusive. Part of this money could go not only to the stock market and bank deposits, but also to the foreign exchange market. However, this process on the scale of the Russian foreign exchange market (about 1 trillion rubles per day) could not lead to such destabilization.
— The main factor of destabilization—geopolitical conflict—remains the same. The main episodes of destabilization of the ruble, starting in February 2022, are associated exclusively with its manifestations in one form or another. An important factor of destabilization was the elimination of diversification of the Russian foreign exchange market — its de-dollarization and de-euroization, on the one hand, and yuanization, on the other. The result of this process is that Russia falls into the Chinese “yuan trap.” A manifestation of this process is the massive refusal of Chinese banks to accept payments from Russia. In addition to the offshore and onshore yuan, a “toxic yuan” has actually appeared from Russia, which the Chinese turn their nose up at.
Another equally important factor is the sharp decline in the transparency of the currency market. The dollar and euro exchange rates after June 12 are formed not on the transparent stock market, but on the absolutely opaque over-the-counter market.
The Russian currency market has fragmented, «broken up» into relatively weakly connected segments, which also contributes to its increased instability. A manifestation of this process is the large gap between the exchange rate of the yuan and the rate of the yuan on forex (the international currency market – «MK» .). For example, on Monday, August 12, the difference between the yuan exchange rate on the Moscow Exchange and on Forex reached 80 kopecks. The reason for the gap is obvious: the Bank of Russia operates on the stock market, which provides yuan liquidity, but there is no such player on the Forex market.
— If a strong enough shock “arrives,” and “black swans” fly to Russia in flocks, then they will see. Such a shock could be, for example, a sharp deterioration in the geopolitical situation or new powerful sanctions.
— In an interview last week, I recommended a «safe haven» — investing in gold. In the week from Friday, August 9 to Friday, August 16, the gold price rose by 5%. I wish I had followed my own advice.