The ruble in April predicted a slow but inevitable weakening

There are practically no significant factors that would work to strengthen the national currency

The Russian currency is gradually and steadily weakening against the dollar and the euro, and so far there is not a single significant factor that can reverse this tough trend. But there are plenty of circumstances that work against the ruble. And both current and potential. What awaits our national currency in April?

On Thursday, March 30, the exchange rate of the dollar reached 77.24, and the euro exchange rate exceeded 84 rubles for the first time since April 20, 2022. According to the head of the analytical department of AMarkets Artem Deev, the ruble has begun a period of prolonged weakening. The tax period in the country is over, the main payments to the company’s budget were made at the beginning of this week, which affected the exchange rate – the ruble grew a little. In April, we should expect the dollar to strengthen to 80 per unit, the euro – to the level of 85. According to Deev, the main factor that puts pressure on the ruble is the federal budget deficit. According to the results of the first quarter, it may exceed 4 trillion rubles – a huge figure, especially considering the figure planned for the whole year in the amount of 2.9 trillion. To compensate for these losses, the monetary authorities need a weak ruble to increase the amount of taxes they collect.

“In such a situation with the budget, neither oil quotes nor the actions of the Central Bank play a decisive role,” Deev said. “The government needs to solve the problem of declining export earnings, and the most obvious way is a gradual devaluation of the domestic currency.”

According to the expert, nothing terrible is happening so far: in general, the ruble has returned to the equilibrium state in which it has been throughout 2021. The ranges in which it is traded are still very narrow, the volatility in the market is low, so we can talk about achieving some conditional stability. At the same time, financial analyst Sergey Drozdov argues, risks remain – geopolitical, sanctions, budgetary, logistical … For example, the reason for the cheapening of oil (and, accordingly, the weakening of the ruble) last week was the emotional reaction of financial markets to problems in the US banking sector . As you know, oil is a high-risk and very volatile instrument, and at the slightest hint of a global crisis, speculators start selling futures contracts for this raw material.

“On the other hand,” Drozdov notes, “on the whole, Russian oilmen successfully coped with the task of reorienting export flows from Europe to Asia, with the help of a shadow tanker fleet. Of course, logistics has risen in price, where without it. Ahead is the spring-summer season, which is traditionally considered favorable for oil. Perhaps by the summer the price of a barrel of Brent will return to its previous positions above $80, which will be good for the ruble. In the most optimistic scenario, the ruble will strengthen to 71-72 per dollar, and in the event of a serious geopolitical negative, it will go to the 82s.

In recent days, the ruble exchange rate has been determined by the action of multidirectional factors, TeleTrade analyst Vladimir Kovalev notes. The negative (not allowing it to strengthen) include the fact that world oil prices stopped growing: in the third decade of March, they rushed from $70 to $80 per barrel of Brent, and then retreated to the $78 mark. In addition, the tax period (end of the month) ended with an increased sale of foreign exchange earnings by exporters for payments to the budget, which increased the demand for rubles.

As for the positive circumstances, this is, first of all, the sale of foreign currency under the “budget rule” by the Ministry of Finance. Further, these are quite good indicators for the Russian economy, released recently: in January, the decline in GDP amounted to minus 3.1% (compared to minus 4.2% in December), and unemployment in February fell to 3.5% from 3. 6% a month earlier. Plus, foreign currency is still in low demand from citizens due to the restrictions of the Central Bank, the high exchange rate and low demand for payments abroad. By itself, the threshold of 77 rubles per dollar is a significant technical and psychological level for market participants, which they do not dare to overcome yet, fearing a subsequent correction. In general, in Kovalev’s opinion, the general trend towards the weakening of the ruble remains, which will probably continue in April.