Analyst Vasiliev predicted a rise in the ruble: the growth of the yuan, US elections

— In autumn, geopolitical news actively influenced the exchange rate: partial mobilization was announced and referendums were held in the liberated territories. What will happen next with the ruble this season?

— We expect the ruble to remain stable until the end of autumn and will trade in the range of 57-67 rubles per dollar, 55-65 rubles per euro and 7.9-8.9 rubles per yuan. In general, the factors behind the strengthening and weakening of the ruble look balanced.

– I would like details. What factors will affect the course in the near future?

– Until the end of October, the ruble is likely to strengthen due to the tax period, which started on October 17 and the peak of payments will be on October 25 and 28. Exporters will more actively sell foreign currency and buy rubles for settlements with the budget.

The main support for the ruble is provided by an impressive influx of currency into the country from the export of raw materials – the prices for oil, gas, metals, fertilizers on world exchanges remain high. In the first nine months of the year, Russia’s current account surplus — the difference between exports and imports — amounted to a record $198 billion.

– Is the ruble not threatened by anything? Even the international situation, which escalated so much in the fall?

– Why? Threats persist. New sanctions may act as a negative factor for the ruble. The US and Europe are seeking to reduce Russia’s foreign exchange earnings from exports by restricting the sale of oil, gas, metals and other raw materials. A decrease in the supply of foreign currency in the Russian Federation may weaken the ruble. At the same time, the demand for the currency remains low.

— Due to what?

— The demand for foreign currency for imports remains subdued due to the economic downturn in Russia (the population consumes less goods, and companies are less willing to buy new equipment to expand production) and sanctions restrictions in the West, which prevent Russia from importing some European goods.

The Central Bank of the Russian Federation maintains strict restrictions on the movement of capital, non-residents cannot trade Russian assets – stocks, bonds, currencies. Because of this, there is no outflow of foreign capital and, accordingly, the demand for currency.

The de-dollarization policy pursued by the Bank of Russia, as well as the risks of imposing sanctions on the Russian exchange infrastructure (we are talking about the Moscow Exchange and the NCC), reduce the demand for the currency of unfriendly countries, that is, for dollars and euros. All this makes them “toxic”, carrying an increased risk for Russians.

Yes, there are many reasons…

“Wait, that’s not all. The Ministry of Finance, after the freezing of Russian foreign exchange reserves in the West, stopped buying foreign currency into reserves according to the budget rule, which also reduced the demand for foreign currency. If the Ministry of Finance returns with the purchase of yuan into reserves under the new budget rule, then this may slightly weaken the ruble: about 1-2 rubles weaker against the dollar and the euro than without foreign exchange interventions.

– How will the decision on the key rate, which will be made by the Central Bank next Friday, affect the ruble?

— We expect that the Bank of Russia at its meeting on October 28 will keep the key rate at the current level of 7.5% and this will not affect the ruble exchange rate. In general, after the introduction of capital flow controls in Russia and sanctions restrictions in the West, the impact of the key rate on the ruble exchange rate has significantly decreased, it has become longer and more indirect.

– What will happen to the ruble at the end of autumn?

— In the first half of November, the traditional moderate weakening of the Russian currency is possible. During this period, exporters who sell the currency are less present on the market and fluctuations of the ruble are more subject to other factors, such as geopolitics or demand for the currency as a savings instrument.

– In other words, the ruble will fall in price? Or will it support something?

– Support for Russian assets and the ruble may be provided by the elections to the US Congress on November 8. As expected, the Democrats will lose their majority there, and this may reduce the amount of patronage to the Ukrainian authorities from America. We assume that the Republicans may be more interested in negotiations with Russia and the conclusion of new agreements on security in Europe and in the world.

In the second half of November, the ruble is likely to strengthen due to tax payments. Also, a meeting of the presidents of Russia and the United States on November 15-16 at the G20 summit in Indonesia on the island of Bali is not ruled out, which can reduce geopolitical tensions and strengthen the ruble.

– It turns out that it is more profitable to keep savings in rubles today than in the previously more familiar dollars and euros?

— Yes, the ruble is gradually becoming a more reliable currency for saving money than before. I can single out three reasons here. First, the Bank of Russia in recent years has achieved success in controlling inflation and keeping it close to 4%. Let me remind you that the Central Bank switched from the policy of targeting the ruble exchange rate to the policy of targeting inflation since the end of 2014.

“But inflation will be double-digit this year. Is this argument still valid today?

— Yes, stable inflation and the increased confidence of citizens in the ability of the Bank of Russia to keep it under control increases confidence in the ruble as a savings currency.

– Well, what other reasons for believing in the ruble?

– The second is the freezing of foreign exchange reserves of Russia, companies and citizens abroad, which undermined the confidence of Russians in the dollar, euro and other unfriendly currencies. Also, record inflation in the US for 40 years – above 8% – and a record price increase in Europe, where it has already reached 9.9%, reduce the purchasing power of dollars and euros.

The third reason is that Russia has taken a strategic course to move away from the use of unfriendly currencies and switch to trading in rubles, yuan and other friendly currencies. This will strengthen the status of the ruble in the world and expand its use among trading partner countries.

– Everything is clear with unfriendly currencies, but what will happen with friendly ones?

— We expect that in the coming months the yuan will continue to rapidly replace the dollar and the euro in the Russian economy and financial system. We believe that by the end of autumn, the volume of yuan trading on the Moscow Exchange will steadily exceed the turnover of the euro and the dollar.