/ world today news/ The dollar unexpectedly fell below 60 rubles on Friday. Few people allowed this even in the wildest predictions. It is believed that too strong ruble is not disadvantageous either for the budget or for exporters. And the Central Bank has an opportunity to reverse the trend. Why doesn’t he?
The dollar fell below 60 rubles on Friday and the euro fell to 64 rubles, returning to the values of 2017. Few expected such a development. Even in the wildest forecasts, experts expected the ruble to strengthen to a maximum of 60 against the dollar.
The West has previously called the Russian currency the best in the world because no other currency has managed to strengthen against the dollar this year. A number of factors have helped the ruble, including currency restrictions imposed by the Central Bank, closing off the ability to withdraw capital to unfriendly countries. “This is the removal of the budget rule, which used to be perhaps the most important factor in the artificial overvaluation of the dollar and the euro. As well as the low demand for currency from the population and the continued high oil prices, which exceed 110 dollars per barrel,” says Natalia Milchakova, a leading analyst at Freedom Finance.
But currency restrictions have been in place for a long time, and the Central Bank is gradually even lifting them, but very carefully. And the other factors are not new either. Why won’t the ruble calm down? Many attribute this to the sale of foreign currency by exporters in anticipation of tax payments from May 25. But this explanation seems to be insufficient.
“The collapse of the dollar and the euro that happened today can really be linked to the start of the tax period when exporters sell the currency. But not only – the strengthening of the ruble today can also be caused by the fact that the ministers of the G-7 countries failed to agree on an oil embargo or any other sanctions against the Russian oil industry. Such a strengthening seems justified, because if the price of oil is much higher than 100 dollars per barrel, the dollar objectively should not be worth more than 60 rubles,” explains Milchakova.
Particular attention should be paid to the ratio of exports and imports, as this is an important factor that determines the exchange rate of the ruble today. “The strengthening of the ruble is primarily due to the preservation of significant flows of export earnings in the face of shrinking imports. The additional inflow of foreign currency from European gas consumers also strengthens this process,” says Vladimir Evstifeev, Head of the Analytical Department of Zenit Bank.
Exporters sell raw materials and goods on foreign markets, sell earned dollars and euros in Russia, but there are no people willing to buy these dollars and euros. Importers do not need them as they import little into Russia due to the withdrawal of Western business, sanctions restrictions or logistical problems. Others who wish to buy currency and withdraw it abroad are prohibited from carrying out foreign exchange transactions.
Russia continues to deliver significant export flows, while imports show a colossal collapse. Russia’s foreign trade statistics are temporarily closed, but experts estimate imports based on the balance of payments from the Central Bank. According to them, in April, imports into Russia may collapse on an annual basis by 60-70%. At the same time, the main blow will most likely be delivered not to the consumer market, but to industries that depend on imported components and equipment. The surplus on the current account of the balance of payments of the Russian Federation, according to preliminary estimates of the Central Bank, amounted to 95.8 billion dollars for January-April, which is an increase of 3.5 times compared to the same period last year.
It is curious that the strong ruble is disadvantageous for exporters and for the budget. But the Central Bank is allowing the ruble to appreciate so much. Although the regulator can change the exchange rate of the ruble with the click of a finger – it is enough to remove currency restrictions.
The regulator is so calm, probably because the Russian Federation’s exporters and budget revenues are in perfect shape even with such a strong ruble. Russia will benefit from the increase in the price of the main export goods – oil, gas, grain, metals, etc.
“A strong ruble is usually unfavorable for the Russian budget. However, high oil prices mean that the ruble price per barrel of Urals, even taking into account the huge discounts to Brent, is about 5 thousand rubles against the 3.2 thousand rubles included in the budget for the current year. , says Evstifeev. In other words, the Russian budget earns an additional 1.8 thousand rubles from each barrel sold than was calculated. These are surplus profits that the budget receives now and are not put into reserves according to the budget rule (it was repealed).
Russia’s budget this year will receive not only profits from expensive oil, but also from expensive gas. He will receive 100 billion dollars only from the European countries for the supplied gas, Citi Bank analysts calculated. This is a record figure, it is twice as much as similar revenues for 2021 and does not take into account other sources of funds, for example, from the sale of coal, oil and other minerals. EU countries send about 200 million dollars to Gazprom for gas every day.
In March this year, tax revenues in the Russian budget system grew by 34.5% year-on-year, reaching a record level of 4.1 trillion rubles, according to the analytical service of the auditing consulting network FinExpertiza. Russia’s budget surplus reached 1.1 trillion rubles by May.
Probably with a strong ruble, the Central Bank wants to stop the surge in inflation, stimulate imports and at least not significantly worsen the economic situation of Russians.
“The short-term strengthening of the ruble helps achieve two goals: stimulating imports and reducing inflationary pressures.” A strong ruble helps prevent excessive inflation, which affects the least socially protected categories of the population. The increase in the price of imported goods now depends not so much on exchange rates as on problems in logistics. But the weakening of the ruble, as it was in March, to 120 rubles per dollar, would make imports prohibitively expensive,” explains Evstifeev.
According to him, the ruble can remain strong in the future, since the current ratio of the price of a barrel of oil and the dollar to the ruble is not critical for the budget.
“The dollar can stop falling at 55 rubles, but if it breaks this level, then the way to the corridor of 50-53 rubles is open for it. The strengthening of the ruble can be stopped by geopolitical news, a collapse in oil prices or the return of the budget rule, and we think that the last factor can be a very significant negative for the ruble, capable of turning the dollar towards 60-62 rubles,” said Milchakova.
“We are now witnessing the peak period of strengthening of the ruble and we agree with the forecast of the Ministry of Economic Development that the ruble will be strongest in the second quarter of 2022, and by the end of this year it is likely to weaken to 76 rubles for a dollar. Already in the summer, the ruble against the dollar can retreat to 70. This can happen, on the one hand, against the background of the recovery of imports and lower interest rates, on the other hand, in the light of a possible drop in the prices of raw materials and the decrease in export supplies of raw materials in absolute terms due to the restrictions of sanctions,” says Alexander Bakhtin, investment strategist.
Translation: V. Sergeev
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