The ruble has lost confidence: the market is expecting a new package of sanctions

The Bank of Russia still sees no reason to extend the mandatory sale of foreign currency earnings to exporters, Central Bank Chairman Elvira Nabiullina said at a press conference after the regulator’s decision on the key rate. Meanwhile, at the moment, the main factor determining the exchange rate of the national currency is precisely this rule, which is in force until April. But even his work is not without glitches. Thus, on February 22, the euro exchange rate on the Moscow Exchange exceeded 100 rubles. What factors could affect the ruble in the near future and will the authorities extend the sale of foreign currency earnings to support the ruble? Experts told MK about this.

Maxim Fedorov, investment advisor at Fontvielle Investment Company:

“In fact, the foreign exchange market is structured the same way as any other: it is governed by the law of supply and demand, which determines the dynamics of exchange rate fluctuations. The main suppliers of foreign exchange liquidity to the domestic market are exporters and the Bank of Russia, the main buyers are importers and the Russians themselves. Long-term trends in currency pairs depend on how the balance is built between foreign currency entering the market and leaving it. The strengthening of the ruble is supported by the presidential decree on the mandatory sale by exporters of part of their foreign exchange earnings on the domestic market, which is likely to be extended in April. True, the positive effect of it is already built into the course as much as possible. In addition, companies sell foreign currency earnings to pay taxes, which is also beneficial for the ruble. Direct sales of yuan and gold by the Bank of Russia by order of the Ministry of Finance in the implementation of the budget rule also have an impact. Finally, the effect of a high key rate is gradually affecting itself, indirectly, through a decrease in import volumes. We will feel its impact maximum at the beginning of summer.

However, despite all the supporting factors, in the long term I expect the ruble to weaken. Why? There is one fundamental problem that is related to the country’s trade balance. This is what limits the strengthening of the Russian currency. This problem is the leaching of part of foreign exchange earnings from the income of Russian companies. Due to the transition to national currencies, including rubles, in mutual settlements, exporters now receive not only dollars, euros and yuan, but also rubles as payment. And they return to the domestic market instead of foreign currency, affecting the balance of supply and demand. Rubles now account for approximately 34% of mutual settlements, that is, more than a third. Thus, I expect the implementation of a trend of moderate devaluation of the ruble against key currencies (dollar, euro and yuan) over the coming months with possible local strengthening. The likely range of changes in February-March will be 1.6-3.2% (that is, it is in this range that the ruble will weaken at the end of one month). If we don’t speak in percentage terms, I expect the euro to confidently consolidate above 100 and the dollar to overcome the level of 95 in February-March.”

Alexander Bakhtin, investment strategist at BCS World of Investments:

“In the near future, the tax period may provide local support to the ruble; the most pronounced effect may be at the beginning of next week, after the long weekend. Taking into account the uncertainty of sanctions (details of new anti-Russian sanctions by the EU and the US will become known on February 23-24), some investors will prefer to wait out the next three days, increasing their positions in the currency. Hence the current uncertainty of the ruble. Already on Monday, it is quite likely that the dollar will move to the area of ​​91. The ruble is mainly influenced by high rates in the economy, currency interventions by the Central Bank, temporary control of repatriation and sale of export proceeds. The budget and exporters are comfortable with the dollar exchange rate averaging 90 rubles. At the same time, it is important for financial authorities to keep the course as stable and more or less predictable as possible. Accordingly, the sale of foreign currency earnings may not be cancelled, but its parameters may be softened if things improve for the ruble. No one is interested in an explosion of volatility. Especially the financial authorities, whose goal is the opposite – to stabilize the exchange rate as much as possible. Therefore, a complete abolition of the mandatory sale of foreign currency earnings is likely only when regulators are confident that the national currency will be able to keep from falling without this “support.” We expect the dollar to average 90-91 rubles, the euro – 97-98, with occasional increases in volatility possible. We expect to see a pullback below 100 for the euro next week.”

Artem Deev, head of the analytical department at AMarkets:

“The decree on the mandatory sale of foreign currency earnings by exporters is not the only way to maintain the ruble exchange rate, but one of a set of measures. It is necessary to maintain the level of currency supply in the domestic market. However, we have already passed the peak of fiscal payments at the beginning of the year, so now the ruble exchange rate will be largely influenced by pro-inflationary factors and the key rate of the Central Bank of the Russian Federation. The inflation rate is now projected to be about 4.9% instead of 5.1% a month earlier, and the average annual rate could be about 6.9–7%. Which gives reason to assume some stabilization of the exchange rate of our national currency. I believe that the Central Bank of the Russian Federation will move to lower the key rate no earlier than the end of March – beginning of April, so for now the ruble will hold its position. They are now asking 92.01 rubles for the dollar, 99.85 rubles for the euro and 13.03 rubles for the yuan. So, in my opinion, in the first half of March, world currency rates will remain approximately in the following corridor: 93 rubles per dollar, about 102 rubles per euro and up to 13 rubles per yuan.”

Ivan Samoilenko, managing partner of B&C Agency:

“In recent days, the value of the dollar on the stock exchange has been growing and until the end of this short week it will probably remain within 92-93 rubles, and the euro will trade at 100 rubles or more. Now the dynamics of the national currency are being put under pressure by the anticipation of a new package of EU sanctions – European officials intend to announce it on February 24. Increasing sanctions pressure, secondary sanctions from the United States (which lead to banks in China, Turkey, India and the UAE ceasing cooperation with Russian counterparties) are factors for the growth of the dollar in the coming days. The decision to sell foreign currency earnings by exporting companies will most likely not be canceled, since this is the main source of foreign currency replenishment in the Russian Federation. This is especially important given that export revenues are falling: at the end of last year, the overall decline was about 27%. Accordingly, maintaining currency flows is extremely important for the state. And to replenish the budget, a weakening of the ruble will most likely be required, since taxes, excise taxes and other payments are made in the national currency. It is expected that the dollar will gradually grow and reach 100 rubles per unit before the end of the first quarter or at the beginning of the second quarter of 2024, the value of the euro will approach 110 rubles. In general, such exchange rates will become our reality this year. The price of the dollar and euro will decrease for short periods (for example, during tax payments by companies), but the trajectory will be clear – towards further weakening of the ruble. Since many factors will put pressure on the currency – sanctions, decreased export volumes, budget deficit (which needs to be replenished).”