The course between word and deed

The growing geopolitical tension around the territories annexed to Russia has collapsed the rates of “unfriendly” currencies. The euro exchange rate fell to an eight-year low, the dollar exchange rate fell to a minimum since the beginning of July. However, less harsh than expected statements by the President of the Russian Federation reassured investors, and panic sales of toxic currencies were replaced by purchases, raising their rates above the close of the previous day.

Such dynamic trading in the currency section of the Moscow Exchange has not been observed, probably, since the beginning of March this year. With the start of the main trades, the dollar rate steadily went down and by 14:30 fell to 53.23 rubles / $, which is almost 4 rubles. lower than Thursday’s close. The euro exchange rate collapsed more rapidly, reaching 50.73 rubles / € in the middle of the main session, the lowest value since October 2014. And judging by everything, the released rubles largely went into the Chinese currency, the exchange rate of which even grew a little (although it used to repeat the movement of the dollar). This led to a widening spread between the domestic (6.41 CNY/$) and foreign (7.08 CNY/$) dollar/yuan exchange rates.

The stampede of investors from “unfriendly” currencies took place against the backdrop of increased geopolitical tensions on the eve of the signing of agreements on the entry of four new territories into the Russian Federation and the statement of the President of the Russian Federation. “There were fears that Vladimir Putin during his speech would announce a change in the status of the conflict between Russia and Ukraine,” notes a Kommersant interlocutor on the market.

Investors have begun to factor into exchange rates the risks of new sanctions, which may fall under the National Clearing Center (NCC), through which currency trading is carried out.

This will make it impossible to exchange trade in dollars and euros, and also increases the risk of freezing the currency on the brokerage accounts of Russians. “In the absence of an exchange rate and increased currency risks, banks will carry out currency transactions at their internal rates. In addition, new commissions for storage and transactions with non-cash dollars and euros will probably be introduced, which will make them even more toxic,” said Mikhail Vasiliev, chief analyst at Sovcombank.

In such circumstances, investors preferred to go to “friendly” currencies, primarily the yuan. According to Mikhail Vasiliev, Russian companies and citizens have tens of billions of dollars worth of “unfriendly” countries’ currency, which creates a potential overhang that will further strengthen the ruble.

However, the panic sale of the world’s leading currencies in the second half of the day was replaced by their aggressive buying.

The President of the Russian Federation did not have time to finish his speech, as the dollar and euro exchange rates won back most of the losses, and at the end of the auction, the dollar exchange rate reached 58.45 rubles / $, adding 1.24 rubles per day. The euro exchange rate returned to the level of 56.7 rubles / €, which is 1.23 rubles. higher than Thursday’s close.

A stormy change of mood among investors occurred due to less harsh than market participants feared, statements by the head of state. “The status of the conflict between Russia and Ukraine, in fact, has not changed. In addition, Vladimir Putin called on the Ukrainian authorities to return to the negotiating table, which in the current situation may well be regarded as constructive rhetoric. As a result, the ruble began to weaken not only against the dollar and the euro, but also against the yuan,” said Mikhail Shulgin, head of the global research department at Otkritie Investitsiya.

However, market participants do not expect long-term stabilization of the market. Course movements will entirely depend on the development of the geopolitical situation and the sanctions response of the West to the annexation of new territories. According to the head of investment strategy and analyst at Expobank, Polina Khvoynitskaya, if the dollar quotes manage to gain a foothold below 55 rubles/$, then the level of 50 rubles/$ will be the next frontier. If the exchange rate stays around the mark of 55 rubles/$, then we can expect movement within the range of 55-61 rubles/$, the expert believes.

In the event of an increase in expectations of the introduction of Western sanctions against the NCC, toxic currencies will continue to fall, while the yuan exchange rate may rise against the ruble.

According to Mikhail Shulgin, in the foreseeable future, the Chinese currency may return to 9 rubles / CNY and even higher. This will be facilitated by further substitution of the dollar and the euro in the Russian economy and financial system. “By the end of the year, the return of the Ministry of Finance with purchases of yuan into reserves under the budget rule is not ruled out,” Mikhail Vasilyev points out.

Vitaly Gaidaev