Raising the key rate of the Central Bank to 15% did not stop the game to depreciate the ruble exchange rate

The unexpected decision of the Bank of Russia to immediately raise the key rate by two percentage points, to 15%, caused a strong but short-lived reaction in the foreign exchange market. The dollar exchange rate, which had dropped to 92.5 rubles/$, at the end of the day strengthened to 94.14 rubles/$. The reaction on the debt market was more stable, where the yield on short OFZs exceeded 13% per annum. Analysts expect the key rate to increase in December, and therefore expect government bond yields to rise to 14–15% per annum. This should support demand for rubles, but given the low activity of exporters, speculators will play against the Russian currency.

Foreign exchange market participants reacted very sharply to the Central Bank’s decision increase the key rate by two percentage points (pp.), to 15%. The dollar exchange rate, which had been steadily declining since the beginning of the main session on the Moscow Exchange, after the announcement of the results of the meeting of the regulator’s board of directors, fell by another 80 kopecks, to 92.51 rubles/$, the minimum since September 12. In 40 minutes, the trading volume in the “tomorrow” settlement mode amounted to 23 billion rubles, twice the trading volume in the previous hour.

However, the game to strengthen the ruble was short-lived, and after three hours the dollar exchange rate recovered its losses and returned above 93.5 rubles/$. At the end of the day, the rate stopped at 94.13 rubles/$, which is 17 kopecks. higher than Thursday’s close. The yuan exchange rate, which dropped to 12.61 rubles/CNY, ended the week at 12.8 rubles/CNY. The euro exchange rate closed at 99.58 rubles/€, showing a symbolic decline compared to Thursday’s close. Trading volumes increased sharply, and with the yuan they amounted to almost 224 billion rubles, the second result for the entire period of exchange circulation of the Chinese currency (see “Kommersant” dated October 27).

Market participants expected the key rate to rise, but the vast majority believed that the Central Bank would raise it by 1 percentage point, to 14%.

Therefore, the first reaction was more emotional than fundamentally justified. “Participants in the foreign exchange market do not particularly see the impact of increased rates on weakening demand for currency, just as the prospects for the translation of the regulator’s tough policy into a decrease in demand for imports are not obvious,” notes Evgeniy Loktyukhov, head of the economic and industry analysis department of PSB.

The reaction on the debt market was more stable. The RGBITR government bond index lost 0.62% during the day and dropped to 591.34 points, which is close to the annual minimum. This happened against the backdrop of a sharp drop in OFZ prices.

At the end of the day, yields on government bonds maturing within a year increased by 81–107 basis points (bps), to 13.14–13.53% per annum. The yield on medium-term OFZ issues increased by an average of 11 bps. p., up to 12.4–12.6% per annum, long-term – by 8 bp. p., up to 12.3–12.5% ​​per annum. The stronger growth in the yields of short-term securities, as noted by the head of the analytical department of Zenit Bank Vladimir Evstifeev, reflects the axiom according to which the stricter the monetary policy of the Central Bank now, the lower the rates will be in the long term.

Against the backdrop of persistent inflation risks, analysts do not rule out a further increase in the key rate.

“The Bank of Russia’s commentary requires careful study, but at first glance it is quite harsh,” notes Maxim Chernega, head of the DCM department of the corporate finance department of the Digital Broker company. According to Sovcombank chief analyst Mikhail Vasiliev, at the next meeting, on December 15, the Bank of Russia may raise the key rate by another 0.5–1 percentage point, to 15.5–16%. He sees an opportunity to reduce the key rate only in the middle of next year, when inflation begins to slow down. “In the base scenario, by the end of 2024 we expect inflation to slow down to 5.5% and the key rate to be reduced to 10%,” the expert notes.

In such conditions, continued growth of rates on the debt market is inevitable. According to Mikhail Vasiliev, in the coming months, the yield on short-term OFZs may rise to 14–15% per annum, and the yield on long-term OFZs will reach levels of 13–14% per annum. Raising rates should strengthen the position of the ruble, but against the background of a seasonal decrease in the supply of currency from exporters, speculators will continue to try to play for an increase in the dollar exchange rate. “After the end of the tax period on Monday, the dollar exchange rate will remain in the range of 92–94 rubles/$, since there are no obvious factors for the continued strengthening of the ruble,” predicts Vladimir Evstifeev.

Vitaly Gaidaev