Experts explained the sharp fall of the ruble: it will be worse

New reality of the foreign exchange market: dollar for 90, euro for 100 rubles

Last week on the currency market was marked by a sharp fall in the ruble exchange rate. The Russian monetary unit has weakened by almost 6 rubles against the dollar and the euro over the 5 working days of the exchange, going off scale for 89 rubles against the first and for 97 against the second. The current ruble exchange rate has reached its lowest level in the last 15 months, returning to the levels of the panic collapse of early March 2022. Few experts doubt that our foreign exchange market is entering a new reality in which the dollar will cost 90 rubles and the euro 100. How quickly this will happen, under what conditions and under the influence of what factors – MK asked financial analysts about this.

Mark Goykhman, analyst at Capital Skills Financial Academy:

“The conditions for the dollar to cost 90 rubles and the euro 100 rubles are already in place. These conditions consist in many components that make the factors for the weakening of the ruble more significant than for its strengthening. Specifically, these factors are:

– continued decline in export foreign exchange earnings due to a decrease in prices and volumes of exports,

– an increase in the cost of currencies for imports due to an increase in its volume and the complexity of supply chains, including due to sanctions restrictions,

– an increase in the excess of budget expenditures over revenues, which requires additional cash allocations and an increase in exchange rates against the ruble in order to reduce the budget deficit,

– the growth of geopolitical and domestic political risks that increase the demand for the currency as a “protective” asset,

– risks of increased inflation due to an increase in the money supply and the excess of its growth rates over the rates of filling the market with civilian products and services,

– an increase in the outflow of foreign currency abroad due to the repurchase of assets by non-residents when leaving the Russian market and, in general, the demand for foreign currency to withdraw it to foreign accounts.

Perhaps a separate stimulating factor is a clear desire in the government for a more expensive currency in relation to the ruble. Last year, First Deputy Prime Minister Andrei Belousov called the range of 70-80 rubles comfortable for the domestic economy. Now he called the comfortable range of 80-90 rubles. And the market sees the top of the new range as a call to action.”

Natalia Milchakova, Leading Analyst at Freedom Finance Global:

“The dollar is already near the level of 90 rubles. This is a fairly strong resistance level, and it is not so easy to break through it on the dollar exchange in order to start storming new highs. The closer this level is, the more willing to sell the dollar, as it looks very strong at these levels, even too much. In principle, the dollar on negative news for Russia, including for the ruble, can reach this level and even rise higher already in the first ten days of July. But it will depend on the news. If the dollar is able to reach 90 rubles. and gain a foothold above this level, the road to new highs will be opened for him: first by 94-95 rubles, and then, perhaps, by 100 rubles, and he will most likely overcome these levels quite quickly.

But the single European currency, which is also heavily overstrengthened, for a passage of 100 rubles. first it will be necessary to pass through the mark of 99 rubles, which will not be as easy to overcome as the level of 90 rubles for the dollar. But if the euro overcomes this level, it will not stop at 100 rubles, but can immediately go to 102 rubles. Again, this will be possible with negative news for Russia, since from a technical point of view, both the dollar and the euro are overbought. However, if there is no such negative, and the Central Bank and the government of the Russian Federation take measures to prevent the growth of the dollar above 90 rubles, that is, above the “comfortable” (according to First Deputy Prime Minister Belousov) corridor for the Russian economy, the dollar and the euro can roll back very quickly up to 82 rubles and 90 rubles, respectively.

Andrey Loboda, economist, director of communications at BitRiver:

“Over the past six months, the ruble has noticeably lost ground against the dollar and the euro, losing almost 25% of its value against key world currencies. The supply of foreign currency at exchange trading has noticeably decreased, while the share of imports continues to grow in Russia. Not all exporters’ money is returned to Russian jurisdiction, while oil prices lost almost 10% in the first half of the year. Russia still has a deficit budget, the negative information effect of sanctions and increased demand for dollars during the tourist season have a noticeable pressure on the ruble. The foreign exchange earnings of exporters will grow at an oil price of $80 per barrel Brent and above. Before this period, the dollar will accelerate to 90 rubles without any special obstacles, and the euro will reach 98-99 rubles. These target levels will be relevant for the middle and second half of the summer. The Russian monetary authorities have not yet expressed their concern about what is happening. However, inflationary risks are increasing. There are no factors to strengthen the national currency, while the devaluation of the ruble by 10% accelerates inflation by 10-12%.