Monday is a successful day! At least for the ruble.
Photo: Svetlana MAKOVEEVA.
Monday is a successful day! At least for the ruble. On May 27, the Russian currency began to strengthen, and as a result, the dollar on the Moscow Stock Exchange fell below 89 rubles for the first time since January 30, and the euro below 96 rubles.
We asked the director of the Market Research Center at the Higher School of Economics, Georgiy Ostapkovich, what is happening and what to expect next. The expert mentioned five main reasons.
REDUCTION OF IMPORTS TO RUSSIA
According to the Federal Customs Service, in the first quarter of 2024, Russia’s foreign trade balance increased by 13.3% ($38.3 billion), but imports decreased by almost 10% ($62.9 billion). And not only from Europe (21%), but also from Asia (4%), Africa (4.1%) and America (18.3%). The largest decrease occurred in March: 20% compared to March 2023.
The main reason, according to analysts, is the reduction in the supply of machinery, equipment, etc. from China due to threats of secondary sanctions from the West. And since China is our main import and export partner, even a small reduction affects the overall indicators of trade turnover.
“When there is a reduction in imports, less currency is needed to pay for it,” says Georgy Ostapkovich. “And this means that the need for foreign currency is also decreasing. The main source is the current account of the balance of payments. If exports prevail, then the ruble strengthens; If imports, then the dollar strengthens.
DELAYS IN TRANSACTIONS
“Lately foreign banks, even friendly Chinese ones, are delaying transactions,” explains Georgy Ostapkovich. – This is also the influence of sanctions and threats to our partners from the United States and Europe with secondary sanctions. The West says that if you transact with Russia, we will impose sanctions on your banks. Therefore, even several influential Chinese banks delay the transfer of funds by 3-4 weeks.
INCREASE IN THE PRICE OF OIL
In March of this year, Brent oil exceeded $85 per barrel. The main reason is the proximity of the start of the driving season in most countries, hence the need for fuel reserves.
“The upward movement of oil always strengthens the ruble, because if any export product (oil, coal, gas, wheat, chemicals, metals, etc.) becomes more expensive, the country receives more foreign currency,” the expert continues. reasons. – It is coming out of the scarcity category: the dollar is falling and the ruble is rising. The budget is formed in rubles and exporters exchange the corresponding currency for rubles, the budget improves and the ruble strengthens.
REPATRIATION OF CURRENCY INCOME
In October last year, authorities required exporters to mandatory repatriate foreign currency and sell foreign exchange earnings. This was necessary to stabilize the exchange rate. In essence, repatriation is the obligation to return funds in foreign currency to the territory of the Russian Federation. Exporters are required to import at least 80% of foreign currency earnings into the country and sell at least 90% of this volume on the stock exchange. The requirements were recently extended for another year.
“This strengthens the ruble, but only slightly,” says Georgy Ostapkovich. – Any factor influences the steering wheel: both the high exchange rate and the repatriation of foreign currency earnings, but these are not fundamental reasons.
HIGH KEY RATE
Now the key rate is 16% per year, which is double annual inflation. The Central Bank does not plan to reduce it. The higher the exchange rate, the stronger the national currency.
WHATS NEXT?
“The dollar will consolidate around 90 rubles (plus or minus 1 or 2 rubles) for a short period (a month and a half or two), and then return to 94 rubles,” the expert predicts. – So far I do not see any fundamental factor to lower the dollar in the long term. However, such turbulence (the ruble goes up and down) is not a very good trend. Because the ruble is needed in a stable state. It is neither a strong nor a weak ruble, but a stable one. Then the business plans of our companies will be more defined. For example, two years ago the dollar was worth 51 rubles and 50 kopecks because the flow of imports into the country had practically stopped. And both companies and the population need imports to buy relevant goods. Therefore, we need a stable ruble, even at 95 rubles per dollar, but one that remains stable. Then both ordinary citizens and economic agents will be able to face the situation calmly.
