June turns of the ruble: what will be the exchange rate at the beginning of summer

In the second half of May, the ruble behaved calmly and predictably. Rate fluctuations were minimal: 79-80 rubles per dollar, 86-87 per euro. But we have already got used to it: after a lull in the foreign exchange market, a storm will certainly follow. This means that in the summer it is quite possible to expect both a noticeable weakening and an unexpected strengthening of the Russian national currency. Experts told MK about possible changes in the course in the near future, as well as about events and factors that can affect these changes: Vladislav Antonov, financial analyst at BitRiver, financial analyst Mark Goykhman, Natalya Milchakova, leading analyst at Freedom Finance Global.

– What events and factors will affect the ruble exchange rate at the beginning of summer. Will these factors work to weaken or strengthen the position of the ruble?

Milchakova:

“The ruble in May showed multidirectional dynamics against different currencies. So, against the dollar, the ruble fell, but only by 0.7%, but made up for lost time, having risen in price against the euro by 3%, and against the yuan – by 2.3%. June starts with an important event for Russia – a meeting of ministers of the OPEC+ member countries, which will be held in person in Vienna on June 4. And already on June 5, the decisions made at this meeting may have an impact on oil quotes, especially if OPEC+ decides to further cut oil production. On June 9, the Board of Directors of the Bank of Russia will announce a decision on the key interest rate. We believe that the key rate of the Central Bank of the Russian Federation in June will remain unchanged at 7.5% and will not change at least until autumn, and the reaction of the ruble to this decision may rather depend on the nature of the accompanying commentary from the regulator. On June 14, the entire financial world will be waiting for the decision of the US Federal Reserve on interest rates. Either a pause in interest rate hikes or a new rate hike of 0.25 percentage points will be announced. We believe that the first of these decisions may become a signal for world markets to depreciate the dollar against world reserve currencies and currencies of developing countries. If at the same time the Fed’s rhetoric softens, this will be an even more negative signal for the dollar and, therefore, the ruble will have a chance for growth. But a new increase in interest rates may negatively affect the ruble exchange rate in the short term. The next day, June 15, the decision on the interest rate will be made public by the ECB. Most likely, there will be no surprises here – the European regulator will again raise interest rates by 0.25 percentage points, which will most likely lead to a short-term increase in the euro against the ruble. We also note that no less important factors for the ruble exchange rate in June will be information on budget oil and gas revenues and Rosstat data on inflation for May. If inflation remains low and budget revenues continue the upward trend that began in spring, these data may have a positive impact on the strengthening of the ruble. At the same time, the geopolitical background will most likely remain tense in June, which will continue to be a source of external risks for the ruble.”

Antonov:

“The main factors affecting the ruble pairs are the instability of the global economy, changes in oil prices, the political situation and the diversification of investment portfolios by major players. It is still unknown what scenario the situation with the US public debt will develop. A default could lead to a significant depreciation of the dollar, which would also have a negative impact on the Russian economy. At the moment, it will first rise sharply in price, like a reserve currency, and then collapse due to a loss of confidence. Panic in the markets will cause a fall in the price of oil and other resources that Russia exports, which will lead to a reduction in the amount of money in the budget.

More specifically, the factors that can support the ruble in June are the following: OPEC oil production cuts in case of cheaper raw materials, actions of the Central Bank of the Russian Federation in case of preventing inflation growth or a threat to financial stability, the introduction of limits on the purchase of foreign currency, the sale of foreign currency under the budget rule .

Factors that weaken the ruble: an increase in demand for currencies with an increase in parallel import transactions, a collapse in oil prices in the event of a technical default in the United States, an increase in the Russian budget deficit, new sanctions from unfriendly countries, meetings of the US Federal Reserve (June 4) and the Central Bank Russia (June 9)”.

Goykhman:

“The ruble exchange rate at the end of May is stable around 80 rubles / dollar due to the balance of factors of its support and pressure. In the near future, the following factors may have a positive impact on the Russian currency:

– preparation for the payment of ruble dividends by large exporters,

– an approved limit on the purchase of foreign currency for settlements with foreign companies leaving the Russian market. There is a “ceiling” here, limited to $1 billion – this reduces the demand for currencies for these purposes.

– a possible reduction in oil production quotas by OPEC+ countries, which is expected at their meeting on June 4. If such a decision is made, oil prices may receive support, which is positive for the ruble.

– traditional for the summer “lull” in economic activity, which stabilizes the currency.

On the other hand, there are also factors hindering the strengthening of the ruble:

– the end of the tax period at the end of May with increased sales of foreign exchange earnings by exporters for budget settlements.

– the ongoing gradual increase in budget expenditures in comparison with its revenues, which increases the unsecured ruble mass and requires a weaker ruble to increase ruble export earnings.

– existing manifestations of inflationary pressure on the part of consumer demand and increase in producers’ costs, which are noted by the Central Bank of the Russian Federation. The anticipated rise in inflation from May’s lows could put pressure on the ruble next month. At the same time, seasonal factors limiting prices in late summer and early autumn will not yet operate in June.

– continuing sanctions pressure. Including for export, which limits the flow of foreign currency into the country, and for import, which makes imported goods more expensive due to increased costs for the purchase and delivery, and a decrease in their range.

– a possible aggravation of the geopolitical situation, which may lead to increased demand for the currency.

– What is the expected rate of the dollar, euro and yuan for the first month of summer?

Goykhman:

“The factors mentioned above are opposite in their influence on the exchange rate and are not entirely predictable. Therefore, we can assume, in general, the range movement of the ruble exchange rate without a pronounced direction. Technical ranges were formed by previous exchange rate fluctuations in the spring of 2023 and amount to approximately 76-83 rubles. per dollar, 82.2 – 90.8 rubles. per euro, 10.8-12.2 rubles. for the yuan.

Milchakova:

“We expect that in June the dollar may fluctuate within 79-83 rubles, the euro – 84-88 rubles, the yuan – within 11-11.6 rubles.”

Antonov:

“An accurate forecast for the strengthening or weakening of the ruble is quite difficult to make, as it depends on many factors and economic conditions that can change at any time. Therefore, I give only price ranges. The dollar to ruble exchange rate in June 2023 may fluctuate in the range of 76–83.5 rubles. The yuan is strong on the Russian currency market. Demand for it is associated with an increase in the number of financial instruments in yuan available to retail investors, as well as with an increase in the share of the yuan in foreign economic settlements and transactions in the foreign exchange market. For the Chinese currency, you can designate a trading range of 10.6–12 rubles. For the euro / ruble pair, the operating range is 82–91 rubles.

The overall situation in the foreign exchange market remains rather unstable due to the current global economic and political situation. In this regard, private investors and individuals buying or selling currencies need to be careful when making investment decisions and follow the news in order to adequately respond to changes in the foreign exchange market.”