Economist Maslennikov identified new risks for the Russian currency

“Sell at least 150% of the proceeds, it won’t help the ruble significantly”

On Thursday, December 7, the ruble strengthened slightly against key currencies traded on the Moscow Exchange, to 92.40 per dollar and 99.69 per euro, respectively. However, this can hardly be considered a harbinger of a new long-term trend. At the moment, the factors contributing to the weakening of the Russian currency dominate those that are pushing it up. So we are talking, rather, about a temporary correction.

In general, the ruble tends to weaken on the first day of each month, that is, after the end of the tax period. But December is a special story: now the exchange rate is affected by the increased demand for currency from the population and importers, characteristic of the last month of the year, as well as the projected increase in spending from the state budget and companies. It is also obvious that the Central Bank’s key rate of 15% per annum and the mandatory sale of foreign currency earnings by exporters will prevent the ruble from falling too radically. In general, according to most analysts, the situation looks quite balanced and does not foreshadow any force majeure.

And yet, I would like to thoroughly understand why the ruble not only did not reach the level of 85 per dollar, which was so close, but turned back. We talked about this with Nikita Maslennikov, a leading expert at the Center for Political Technologies.

“Now that the tax period is over, there is no urgent need for exporters to speed up sales of foreign currency earnings,” says MK’s interlocutor. “They fulfilled their obligations to the state, and there are almost no reserves left.” So everything is logical. In addition, in early December, oil prices dropped below the “support line” of $74 per barrel, and this is a fairly serious change. Market participants deliberately went short because they knew that Saudi Arabia and Russia had extended (to the first quarter of 2024) their obligations for additional and voluntary production cuts. And in recent days, the dollar has seriously strengthened on the world market against other currencies, including, of course, the ruble. This is largely due to the fact that the United States was very active in trading oil, which had long become its number one export commodity. During such periods, the dollar invariably strengthens as it behaves as a kind of quasi-oil currency.

– How do you see the ruble exchange rate until the end of 2023 and beyond?

– I think that in December it will be in the range of 90-95 per dollar. There are enough factors contributing to its stabilization, in particular, a favorable information background. This is the expectation of annual GDP growth rates above 3.2%, and the direct line of the president, and the next tax period, and the Central Bank meeting on the key rate on December 15… However, all these circumstances in no way cancel the risk of a gradual weakening of the exchange rate next year. According to forecasts from the Organization for Economic Co-operation and Development (OECD), the global economy will look noticeably weaker in 2024. Accordingly, the question arises about what the demand for Russian energy resources will be and how many physical volumes of oil and gas we will be able to sell. And if there is a serious minus in this indicator, then this will inevitably affect the ruble.

– If the ruble continues to weaken in the coming days, can the financial authorities take any additional measures to influence the exchange rate?

– Which for example? They don’t have anything left in their arsenal anymore. The key rate was raised high, exporters were obliged to sell the lion’s share of their foreign exchange earnings… The problem lies much deeper. If we remain a market economy integrated into the world economy, then the exchange rate of our national currency fundamentally depends on the state of the trade and payments balance. And if there are signs of deterioration, you sell at least 120%, at least 150% of foreign exchange earnings, this will only give a short-term effect of a market nature. Of course, all the measures taken by the government will smooth out exchange rate volatility, at least in the next six months, but if foreign trade volumes begin to shrink, this will not help matters much.