/ world today news/ This week, the Russian currency managed to overcome an important psychological boundary. It strengthened and crossed 90 rubles per dollar. The dollar rate has approached 88 rubles. Will the ruble manage to strengthen even more?
The Russian currency had already been strengthening for six weeks, but this week saw another strong surge. The ruble broke through the psychologically important barrier of 90 rubles and fell close to 88 rubles per dollar.
The main factor for the weakening and strengthening of the ruble this year is the export and import indicators. The outflow of capital from Russia in 2023 has decreased six times compared to last year, so it cannot be considered the main indicator of the weakening of the ruble, Elvira Nabiulina, the head of the Bank of Russia, said recently.
“The assessment of the head of the Central Bank seems adequate, as well as the thesis that it is wrong to put capital flight as the main reason for the weakening of the ruble this year. The decline in capital outflows this year comes against a relatively low baseline in 2022, when, according to various indicators, between $217 billion and $243 billion were received due to the application of geopolitical risk in the country. Estimates of net outflows by the end of 2023 range from $60 billion to $90 billion,” notes Alexander Bakhtin, investment strategist.
The ruble fell this year due to the distorted balance of payments – imports quickly recovered to 2021 levels, while export flows are limited under the pressure of negative geopolitics and sanctions, the expert recalls.
Nevertheless, the ruble has strengthened for six weeks in a row. Support comes from many factors. Thus, at the end of October, the ruble lasted through the tax period. As a result of the use of the ruble, the Central Bank increased interest rates and introduced rules for the mandatory sale of foreign currency earnings by exporters.
“This measure should provide about another 2-3 billion dollars, which will help support the demand for foreign currency and stabilize the exchange rate of the ruble.” The efforts of the Russian authorities to transition to the foreign exchange market have already led to the desired results,” says Alexander Potavin, an analyst at Finam financial group.
The Russian currency has been particularly strong over the past few days, despite lower oil prices. “We can assume that the sharp strengthening of the ruble indicates an approach to external correction. The closest target for reduction may be the level of 88.4 rubles. Lower levels are possible, but they are not fundamentally justified,” President Potavin.
According to him, until the end of the month, the ruble could maintain a strong position as it will receive support in the next tax period, including the October oil production tax, which could exceed 1 trillion rubles. However, the expert doubts that the dollar rate will remain below 90 rubles and by the end of the year the dollar rate will return to a higher level.
“Our expected trading range for the dollar/ruble pair until the end of 2023 is 88-95 rubles. The ruble’s strong exchange rate is likely to persist until the presidential elections in March 2024, after which it will become a problem for the partial replenishment of state budget revenues. The decree on the repatriation of foreign exchange earnings will not be extended, which in turn will lead to a weakening of the ruble in the second half of next year,” predicted Potavin.
“The ruble retains the potential for negative consequences. At the end of this year, we expect the dollar rate to be between 87-90 rubles,” says Vladimir Evstifeev, head of the analytical department of Zenit Bank. Traditionally, at the beginning of the new year, the ruble tends to weaken. In 2024, however, the situation is different. “The excellent dynamics of the ruble at the beginning of the year was often occupied by the reallocation of capital by international investors. Now their influence on the foreign exchange market is minimal, which increases the ruble’s dependence on more traditional factors,” says Evstifeev.
Alexander Bakhtin does not exclude the weakening of the ruble towards the end of the year. “Foreign inflows may pick up by mid-November amid high oil prices,” observers said this month. This means that the decline in oil prices in the financials may accordingly lead to weaker ruble prices closer to the end of the year,” he explains.
Now that the market is approaching its balance, nothing fundamental has changed for the ruble, so the potential for further development is small, the expert believes. “Most likely, in the near future, the dollar is trying to find a balance in the area of 89-92 rubles, but by the end of the year we will see 92-94 rubles,” interrupts Bakhtin.
Translation: V. Sergeev
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