The past week was the saddest for the Russian currency over the past six months. In terms of the rate of decline, the ruble looks worse than other currencies in developing countries. The euro rose in price to 91 rubles, and the dollar – to 78. Higher levels are not far off. What is happening with the Russian currency – and is there even the slightest hope for its strengthening by the New Year?
The Russian ruble depreciated against the euro at the end of the week to its lowest level since February 2016. The weekly rate of decline is the highest in six months. The euro has risen in price against the ruble right up to 91. The situation is not better against the dollar: the ruble fell at the end of the week to its worst value since the beginning of April – to 78.
I must say that the currencies of all emerging markets are now falling. But the ruble stands out against the general background. It is cheaper than anyone else. What’s the matter and what are the chances of the ruble this year?
The ruble has recently been under pressure from geopolitics. The US rhetoric against the construction of the Nord Stream 2 gas pipeline is becoming louder. On Friday, US senators proposed to impose sanctions on a number of Russian officials over the Navalny affair. Germany, without whose support Gazprom will not cope with the project, is at a crossroads. And it is not yet clear to the end which road Berlin will take – although, of course, Russia hopes that Angela Merkel will not go astray.
In addition, the world was again on the brink of hysteria due to fears of a second wave of quarantine measures. The virus is gaining momentum with the approach of autumn, and all over the world. “On Friday, the ruble reacted with a decline to the announcement of quarantine measures in Moscow,” says Alexei Kiriyenko, managing partner of Exante.
This factor generally reduces risk appetite, which led to a drop in demand for ruble-denominated government debt. That is, the demand from investors for OFZ decreased, which automatically deprived the ruble of support. The share of non-residents in OFZs fell below 30%.
Finally, oil hit the ruble. Brent lost $ 44 a barrel and went back to $ 42. For the week, oil lost 3%, which did not add optimism to the ruble, the expert points out.
“The events with the Turkish lira are also pressing on the Russian market. As a rule, the problems of one of the currencies of developing countries develop into general wariness for the entire block of EM (developing) countries, ”explains Kiriyenko. The fact is that the Central Bank of Turkey has defended the lira, raising its key rate this week. As a result, the lira began to strengthen by 2.5%.
Not long ago, the world started talking about the onset of the dollar decline stage. And it did decline on the back of a victorious recovery in equity markets after the March plunge. “However, recently the situation has begun to change. September justified the title of a difficult month for the stock markets. Initially, the decline in the indices was due to the rebalancing of portfolios by large players, now – the increase in the number of diseases in the world, weak data and a lack of incentives from the US government and the Federal Reserve, “- said the managing partner.
Really, the ruble this year already has nothing to shine? A number of experts do not think so.
For example, analysts at Alfa-Capital predicted this week the ruble will strengthen by 8-15% by the end of the year. The ruble will return to 70 or even 65 against the dollar. The ruble will be optimistic due to a strong economy, low debt levels and a current account surplus, they say.
Prior to this, Renaissance Capital experts expressed the opinion that the ruble is undervalued and by the end of the year will return to a fair rate. And even the US sanctions, which they can adopt by the end of the year, will not prevent this, because the sanctions are unlikely to be destructive, analysts say.
Only tough sanctions, which include the ban on payments in dollars and in euros by the State Bank of the Russian Federation or a ban on the purchase of the new US government debt, can seriously collapse the ruble. According to Raiffeisenbank’s estimates, in the event of tough sanctions, the dollar may rise in price by 10 or even 15 rubles.
Deutsche Bank believes that one cannot be sure that the worst is over for the ruble. Still, few believe in tough sanctions.
Reputable investment bank Goldman Sachs is also betting on the growth of the ruble and a number of other EM currencies in the fourth quarter of this year. When the passions subside, the ruble will become attractive due to the high carry trade (when investors borrow currency in a country with a lower interest rate, invest in the assets of a country with a higher interest rate, and can earn on the difference in key rates) and due to the possibility of cyclical strengthening in the last three months of the year.
High-yielding currencies of emerging markets can show a rally if a vaccine and other positive news for risky assets are developed, analysts at the investment bank say.
Prior to the development and launch of mass production of a vaccine, markets, including the ruble, can be helped by new stimulus packages from the world central banks. It is likely that at some point the Russian regulator may also come into play and support the Russian currency if it considers that the ruble has weakened excessively, ”said Aleksey Kiriyenko.
However, for now, all factors look negative for the ruble.
“Local bounces of the ruble towards strengthening by the end of the year are possible, but in general, the euro-ruble pair is going by 100, and the dollar-ruble – to 80”,
– sums up the interlocutor.
The only hope is that the likelihood of a new financial crisis in the world is still low. Researchers at Oxford Economics surveyed 162 international companies this month. They estimate that the probability of a crisis averages 20% over the next two years. On the one hand, this is a lot. On the other hand, it is unlikely that a financial crisis will break out right now. At least now the risks are lower than they were in 2008, notes The Financial Times.
First, the US Federal Reserve and other central banks have pledged to do whatever is necessary to keep the markets running during the pandemic. And they really have already poured huge flows of liquidity there. Secondly, this time the banks are not the instigators of the crisis. Bank capitalization in the United States and most of Europe is higher than in 2008.
Although, of course, nothing similar to what is happening now has never happened in the world.
- video right">
Watch even more videos on the VZGLYAD YouTube channel
–
