The dollar was predicted to weaken by 4-6 rubles: a fairy tale without a happy ending

This year has turned out to be a failure for the Russian currency

While financial analysts are arguing about what will happen next with the national currency exchange rate, government officials already know the answer to this question: the ruble will strengthen. The latest forecast from the Ministry of Economic Development shows that the “wooden” one is ordered to drop the dollar from the current 96 to 90-92 rubles. True, we will have to wait for the failure of the American currency for several months – by the middle of next year. But this year too, the ruble will advance towards the position of the toxic dollar.

The head of the Ministry of Economic Development, Maxim Reshetnikov, is optimistic and claims that by mid-winter no one will pay more than 94 rubles for “green”. “By the end of 2023, pressure on the trade balance from foreign trade will weaken. Since June, there has been a reversal in the situation on the world commodity markets – rising prices for oil and a number of other export goods,” economic department officials explain their optimism.

But why would the ruble, which had been weakening all this year and then simply collapsed at the end of the summer, suddenly begin to rise in price and strengthen? By and large, in this regard, the ruble can only rely on the cost of oil, which is becoming more expensive on world markets – a barrel of Brent has almost reached the “stolnik” level, and for the Russian Urals brand they demand $80 per barrel. At the same time, according to Vladimir Putin, in August our country’s oil and gas foreign exchange earnings will be compared with last year’s figures. All this is true, but there is much more bad news for the ruble than good.

This year has turned out to be a failure for the Russian currency. Since January, quotes for “wooden” have decreased by more than 30%: if in January the dollar was 70 rubles, now it is 96 rubles. Moreover, in the last month of summer, the fall of the ruble was completely precipitous; the “wooden” ruble reached three-digit numbers.

The president was forced to intervene in the situation, giving the go-ahead to the government to strengthen the ruble. First of all, the regulatory mechanism was activated: the Board of Directors of the Bank of Russia increased the key rate from 7.5% to 13%. The tightening of domestic monetary policy, which usually benefits the national currency, did not work this time: the collapse of the ruble slowed down, but it was still not possible to reverse the negative trend – to return to the spring, and even more so, to the New Year’s exchange rate indicators.

Many independent financial experts believe that so far the decisions taken by the monetary authorities are, to put it mildly, half-hearted. Yes, the key rate was raised. Yes, export duties will be introduced starting October 1, linked to the exchange rate. The duty will be from 4 to 7% of the customs value and will be charged at an exchange rate above 80 rubles per dollar. However, this cannot affect fundamental economic factors, the impact of which, in fact, weakens the ruble.

First of all, this is a reduction in the receipt of hard currency from export earnings. In addition, the ruble is negatively affected by the rise in imports for the autumn-winter season with an increase in the demand for hard currencies. Plus increased inflation, noted by the Central Bank as a powerful factor of pressure on the ruble. The federal budget deficit has not gone away either, stimulating an increase in the money supply in order to cover its expenses and requiring a weakening of the ruble to increase the ruble revenue of exporters and treasury revenues. In the same vein is the desire for an outflow of currency from the country on the part of Russians and non-residents, both from the point of view of the withdrawal of assets, and because of uncertainty and geopolitical risks.

How do the authorities counter these risks? So far, the state has announced a ban on the export of motor fuels: fuel oil and diesel. Supplies of such types of energy resources abroad have so far provided at least a third of the national budget. If oil revenues are taken away from Russia, then the incentives to support the ruble will not last long.

Against this background, the forecast of the Ministry of Economic Development about the ruble strengthening over the next three quarters looks like a fairy tale plot. Of course, we all really want this fairy tale to have a happy ending, and for the ruble to defeat its currency enemies. But it’s hard to believe in such a happy ending.