The exchange rate of the national currency can reach 100 rubles per dollar: what will be the key rate
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How will the increase in the Central Bank index affect the market?
This coming Friday, July 21, the regulator will decide on the key rate. The market expects it to be raised. Usually this step is positive for any national currency and leads to its strengthening. But one should not be happy for the ruble, which has lost a third of its value since the beginning of the year. Many analysts believe that he will not be able to win back even part of what he has lost: the authorities will not give him this. They will simply lower the ruble exchange rate a little more during the week, so that after the decision on the rate, the domestic currency will return to the values they need. How justified this point of view, “MK” found out from financial experts.
In early July, the head of the Central Bank of the Russian Federation, Elvira Nabiullina, urged not to build “conspiracy theories” regarding the ruble exchange rate, but to look at the dynamics of foreign trade. Meanwhile, experts disagreed whether the fall of the national currency to the area of 90 rubles per dollar and 102 rubles per euro was only the result of the action of market forces, or the monetary authorities had a hand in this, interested in a weak ruble to plug the growing “hole” in the budget.
As the chief analyst of Sovcombank, Mikhail Vasilyev, recalled, firstly, the Central Bank of the Russian Federation does not target the ruble exchange rate, but inflation. The confidence of market participants is one of the main assets that the Bank of Russia has. Secondly, many factors affect the ruble, most of which are beyond the control of the Bank of Russia: commodity prices, export and import dynamics, geopolitical and budgetary risks. Because of this, the ruble can “carry away” in any direction in a week.
“The impact of changes in the key rate on the dynamics of financial markets will be noticeable only if it turns out to be above the range of 0.25-0.5%,” says Artur Meinhard, Head of Analytical Department for Global Markets at Fontvielle Investment Company. “In this case, the decision will be reflected both in the short-term strengthening of the ruble exchange rate and will be reflected in the stock market.” So far, there are no prerequisites for such “surprises”: inflation is quite modest, industrial production is growing. Against this background, it makes no sense to sharply increase the key. “The ruble has already fallen against foreign currencies, so further depreciation of the ruble before the meeting of the Central Bank of the Russian Federation looks like a dubious strategy,” says Artem Tuzov, director of the corporate finance department at IVA Partners Investment Company. “At the same time, it is also not worth expecting a strong strengthening of the ruble after the decision on the key rate: this is the case when everything is already included in the course.”
According to the laws of economics, an increase in the key rate contributes to the strengthening of the ruble, since it increases the profitability of ruble assets and, accordingly, there is an influx of foreign investment to increase the income of depositors under the carry trade strategy. It is based on the difference in interest rates between two currencies and consists of borrowing money in a currency with a low interest rate and investing this money in a currency with a higher interest rate. “However, after the start of the special operation in 2022 and the freezing of funds from foreign investors, this strategy does not work,” emphasizes BitRiver financial analyst Vladislav Antonov. — Trading volumes on the local foreign exchange market fell by half. The market has become low-liquid and is now under the control of systemically important banks.”
Accurate hints that the authorities have the ability to achieve the desired ruble exchange rate are also expressed by other analysts. “The ruble is kept in the corridor of 70-90 rubles per dollar, so the budget is drawn up taking into account these deviations,” Nina Kultysheva, head of the School of Financial Literacy and Investments, continues the topic. “I don’t recommend buying: the rate can jump up to 100 rubles per dollar, since there are technical conditions for this, but then the ruble rolls back.”
According to the Central Bank of the Russian Federation, the current account balance turned negative in June 2023, which also contributes to the devaluation of the ruble. As the head of the analytical department of the BKF Bank Maxim Osadchiy noted, the fall of the ruble accelerated after June 24, which testifies in favor of an increase in the withdrawal of capital from Russia due to the demarche of the head of Wagner PMC Yevgeny Prigozhin. In the medium term, the ruble is doomed to devaluation. It is possible that in the coming months the level of 100 rubles per dollar will be broken, the expert is sure.
“This week, the continued weakening of the ruble against the dollar and the euro is more likely than growth,” said Natalya Milchakova, lead analyst at Freedom Finance Global. The weakening of the ruble is already affected by the aggravation of geopolitical risks, which creates a negative background for the domestic currency. According to the expert, this week the dollar will fluctuate in the range of 89-92 rubles, the euro – in the range of 99-102 rubles, the yuan – 12.3-12.7 rubles.
Newspaper headline:
The Central Bank urged not to build “conspiracy theories”
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