Economist: “The budget benefits from a weak national currency”
The foreign exchange market in our country is experiencing a rebirth. This happened after June 12, when Washington introduced new financial sanctions against Russia, which led to an actual ban on exchange trading in the dollar and euro. And now there is more and more talk — both in financial circles and at the everyday level — that it is time to forget about the dollar in Russian spaces. The majority of company payments and citizens' foreign currency savings are now in the Chinese yuan. But can such a paradigm shift be called long-term? Is the dollar exchange rate really about to cease to play any role in our economy? What currencies make sense to invest in now? MK looked for answers to these questions during a round table, in which experts took part: Doctor of Economic Sciences, head of the RANEPA department Alexey Vedev; Analyst at the Capital Skills Financial Academy, Candidate of Economic Sciences Mark Goikhman; financial advisor, author of the Economism project Alexey Krichevsky.
— After American sanctions against the Moscow Exchange in mid-June, the foreign exchange market was shaking quite a bit. On some days, toxic currencies, whose official exchange rate is now determined by the Central Bank based on over-the-counter data, either rise or fall by the same amount. What does this volatility indicate? After five months of relative stability, is the ruble looking for a new equilibrium point?
Krichevsky: — In fact, nothing critically terrible happened to the ruble exchange rate. There was no panic or queues at the exchangers, as was the case, for example, in 2014. Sanctions against the Moscow Exchange are actually the last thing Western countries, led by the United States, could do to at least slightly destabilize the economic situation in Russia. They simply have no further moves in this area. But in fact, there are no problems with the dollar. Yes, exchangers offered immediately after the introduction of sanctions against the Moscow Exchange (when people still did not really understand their essence) “American” for two hundred rubles, but this lasted less than a day — and even then not everywhere. Yes, there was increased volatility, but in the end nothing changed for the consumer. We all lived calmly in terms of the exchange rate, and continue to live. We, both the state and the people, have been ready for these sanctions for a long time. There is simply no reason to worry about this topic.
Goikhman: — The situation with the exchange rate resembles damped fluctuations. If you look at the chart of the ruble exchange rate against the dollar and the yuan, then starting from June 12 we saw the largest, sweeping movements. At the moment, the difference between purchases and sales of the yuan and the dollar is sharply decreasing. Now the dollar, euro, yuan and ruble are indeed looking for some new points of support, new guidelines for the formation of the exchange rate. Nervousness passes along with the expectation of some horrors. Everyone sees that nothing special is happening in the foreign exchange market.
Vedev: — My point of view is somewhat different. I believe that until 2022, for thirty years, our foreign exchange market was quite efficient. The central indicator was the dollar exchange rate. In 2022, the situation has changed fundamentally. It is wrong to say now that there is no panic, and therefore everything is fine. I also do not agree with the fact that the ruble is looking for some kind of stabilization, a point of equilibrium. Now it's just a different market. It is very risky and must be handled very carefully. In this regard, I think that the burden on the Central Bank should increase. He will have to somehow regulate the current situation.
Dollar — 100 rubles each?
—Where will the currency pendulum swing, so to speak, this summer? To what level can the ruble reach and when?
Krichevsky: — The ruble will return to where it was before the introduction of sanctions against the Moscow Exchange. Further, if we talk about the horizon of the second half of the year and the end of the year, there are many forecasts, for example, a dollar for a hundred rubles. Why? Because budget expenses are growing, there is a not entirely clear story with the oil fleet, which largely provides us with foreign exchange profits, but it is being “covered” with sanctions. There are also questions regarding import and export. But if we talk about July-August 2024 and look no further, then the dollar may consolidate at around 92–93 rubles. It is unlikely that the ruble will sink anywhere deeper this summer. But in the fall and winter, our national currency will experience a gradual devaluation, and we should not hope that it will be imperceptible.
Goikhman: — The long-term trend towards the weakening of the ruble will continue. Because now the factors to strengthen it have been exhausted. Earlier, due to the operations of the Central Bank and the Ministry of Finance, the supply of yuan increased. Sales of foreign currency earnings also increased to the maximum. Now all this is offset by the decision to reduce the volume of obligations for the sale of foreign currency earnings from 80 to 60%. In addition, in July, the Central Bank’s operations with the yuan are reduced — that is, its supply will decrease. The increase in oil prices, which was observed quite sharply in June — from 77 to 86 dollars per barrel, has also been suspended. Of course, one cannot write off the fact that the decision to increase the budget deficit in the State Duma for 2024 is currently being discussed. In this case, the supply of rubles and the demand for borrowing in rubles will increase. That is, there will be an increased need for loans. This will limit the growth of the ruble and accordingly increase the exchange rate of other currencies against the ruble. These factors are long-term, in contrast to the local ones that we observed during the second half of June. In addition, we should count on an increase in imports. And this is one of the main factors working for the gradual weakening of the ruble. At the same time, I agree that this weakening will not be sharp and shocking, since, in turn, there are factors balancing the ruble. Therefore, I think it is unlikely that the national currency will reach 100 rubles per dollar in the coming months. With a high probability, the dollar will not fall below 80–81 rubles in the coming months. and will not rise above 94–95 rubles. This range will remain.
Vedev: — And again I disagree with my colleagues. I do not see a trend towards a weakening of the ruble exchange rate. We have a very strong trade balance. This means that we export more than we buy. There is also a reduction in capital outflow because external economic risks have increased. Therefore, the natural trend is the strengthening of the ruble. I think that the monetary authorities will try to maintain a corridor of 85–90 rubles per dollar.
— Some experts believe that two parallel exchange rates are already beginning to form in Russia — the official Central Bank and “for the people”, in exchange offices. Do you agree that such prospects exist?
Krichevsky: — Yes, some are already comparing the situation in Russia with Iran, where there is an official, banking, and also a third course — “black”. But in Russia there will be nothing like this: official and banking have already become noticeably equal, but “black” has not arisen.
— Then give practical advice to those who are going on vacation abroad. Previously, everyone who traveled abroad — and to any country — bought dollars or euros at home in advance. And upon arrival they were easily exchanged for local currency. What about now, in the new currency reality? Maybe we shouldn’t bother with dollars and euros and just buy Turkish lira or Arabic dirhams in Russia?
Goikhman: — Firstly, the demand for tourist purchases of foreign currency has decreased due to the fact that foreign tourism has also decreased in scale. Secondly, the situation with purchasing currency in Russia or in another country has not fundamentally changed. On the spot, say, in Turkey, Egypt or the United Arab Emirates, it is much easier to buy local currency than to look for it in Moscow or other Russian cities.
The ruble is more profitable than all currencies
— Question from our reader: is it true that the federal budget needs a weaker ruble to avoid problems filling the treasury?
Vedev: — Of course, the budget benefits from a weak ruble, this is obvious. A weak ruble plays into the hands of exporters, especially commodity exporters, and the budget, since it provides greater ruble profits for the same amount of incoming dollars. On the other hand, with a weak ruble, the threat of inflation increases. And it is quite real.
— Readers are also interested in whether foreign currency deposits will be profitable in the near future?
Krichevsky: — There are practically no deposits in dollars and euros. They are offered by literally a couple of banks and on bad terms — that is, at low interest rates. If you have stocks of dollars or euros, it is easier to keep them at home. This will be an additional tool for diversifying your personal investment portfolio.
— Let’s continue the questions: is it worth opening a deposit in yuan?
Goikhman: — It is impossible to completely replace the dollar and euro with yuan. In addition, the yuan itself is not such a good substitute for hard currencies, since its exchange rate is largely regulated by the Bank of China. It is not a fully convertible currency in terms of the difficulty of exchanging it for other currencies. That is, there is no need to hope that everything will end with the Yuanization of the Russian economy. As for deposits in yuan, I think you should not open non-cash deposits. The risks are high. It cannot be ruled out that the West will eventually introduce sanctions against the yuan.
Vedev: — For two and a half years we have been forced to rebuild the logistics of foreign trade. The quite natural result of this process is that the share of the dollar and euro is falling, while the yuan, as well as other currencies from Southeast Asia, is growing. In general, I would not recommend working with any currency non-cash and opening deposits now, because these are big risks. Especially taking into account the high interest rates and almost zero risks that exist on deposits in rubles.
— Give advice to our readers: what now, given the new situation in the foreign exchange market, should be done with bank loans and deposits?
Krichevsky: — One of the first rules of financial literacy: do not put all your eggs in one basket. What are we talking about? There is nothing wrong with buying foreign currency. You can also buy gold. If we talk about deposits, about deposits, then the current situation, when you can put rubles in a bank for six months at 17–18% per annum, is very good. If we talk about mortgages, then there is no immediate answer: now is not the time. You can take out loans only if you really urgently need them and in the future this borrowed money will bring you much more — so that it can be returned painlessly to the bank with high interest rates.
Goikhman: — I advise you not to take out loans if possible now. At the moment, the stakes are very high. Where to invest? In deposits! Yes, this is a good undertaking — reliable and profitable. You can wait for an increase in interest rates in July (most likely, the Central Bank will raise the key rate even higher from the current 16%) and even higher deposit rates, deposit money for a short period and quite reliably. If we talk about bonds, then you can, as they say, stake out high returns for several years at once. And when rates go down everywhere, you will have an increased interest rate.
Vedev: — Traditionally, for thirty-five years, foreign currency was a “safe haven”, and therefore, probably, Russians got used to it a little, right away go into cash dollars. Now I see big risks in this. My recommendation is to work with rubles. These are, of course, deposits and bonds. Here the yield is high, and the risks are minimal, because there are a lot of corporate bonds of large companies, including government ones, in circulation. Well, a ruble deposit at current rates will definitely help beat inflationary losses.