The dollar just opened – Newspaper Kommersant No. 153 (7354) of 08/23/2022

For the first time in 20 years, the dollar is worth more than the euro on the Russian market. The exchange rate of the dollar rose on August 22 to the level of 59.87 rubles/$, while the euro fell below 59.50 rubles/€. This is partly due to the dynamics of the global currency market, where the dollar is also more expensive than the euro, but also by internal factors – the transfer of part of gas contracts to the euro and the active process of devaluation. In the coming months, the US currency may maintain a strong position, both in the external and domestic markets, analysts say.

The dollar exchange rate on the Moscow Exchange on August 22 overtook the euro. In the first hour of trading, the US currency added more than 1 ruble. and reached the level of 60.11 rubles/$. At the same time, the euro rose only by 40 kopecks, to 60 rubles/€. At the end of the day, rates stopped at 59.87 rubles/$ and 59.48 rubles/€.

The last time the single European currency ended the trading session below the dollar was almost 20 years ago, in the fall of 2002. At that time, investors were still wary of the currency that appeared in 1999 and did not use it so often in calculations.

The movement of rates on the Moscow Exchange is largely determined by the dynamics of the euro against the dollar on the world market. The European currency lost 1.1% to $0.9928 in today’s trading, the lowest since December 2002, according to Investing.com. in seven days it fell by 3.8%.

The strengthening of the dollar against the euro comes against the backdrop of increased risks of recession in Europe.

“The EU trade balance in 2022 is in deficit due to the rise in the price of gas, oil products and food, in some cases to historical highs. This deprived the European currency of fundamental support,” says Kirill Kononov, an economist for international markets at Otkritie Bank. The dollar remains a protective currency on a global scale, said Vladimir Evstifeev, head of the analytical department of Zenit Bank.

Additional pressure on the European currency is exerted by the ECB’s softer monetary policy compared to the US Federal Reserve.

Since March, the American regulator has already raised the rate four times in total by 2.25 percentage points, to 2.25-2.5%. The ECB started raising the key rate only in July, raising it by 0.5 percentage points to 0.5%. At the moment, the market expects the Fed to continue raising the rate up to 3.75%, while expectations for the ECB rate are limited to 1.25%.

“The difference in rates between the Fed and the ECB is growing, which stimulates the flow of capital into dollar assets in order to get higher returns there,” says Kirill Kononov.

There were also internal factors for the stronger positions of the US currency. On Monday, investors actively won back the reports that the Ministry of Finance may carry out foreign exchange interventions through cross-currency mechanisms as early as September. This news supported the exchange rates of major currencies, but in euro the effect was limited by its excess supply in connection with the preparation of companies for the tax period. “Russia still pays for gas in rubles, which creates an excess supply of the European currency in the economy,” notes Egor Zhilnikov, chief analyst at PSB.

In the current conditions, the market does not expect a quick return of the euro to parity against the US dollar, as it was in mid-July. “As long as the Fed’s rhetoric remains hawkish and the ECB delays anti-inflationary measures, the single currency will remain under pressure,” believes Vladimir Evstifeev. According to Kirill Kononov, in the coming months, the euro exchange rate may fix at the level of $0.95-1.

In Yegor Zhilnikov’s opinion, the dollar’s surge will not continue and within a week it will return to the range of 58–60 rubles/$, just like the euro.

This will be facilitated by an excess supply of foreign currency from exporters, who continue to generate ruble liquidity against the payment of basic taxes on August 25. After paying them, the influence of this factor will decrease, and the rate will go up again. Oil quotes under pressure, a limited supply of energy resources to European markets, as well as news about the imminent start of foreign exchange interventions, the expert believes, will allow the dollar to confidently consolidate above 60 rubles.

Vitaly Gaidaev