The ruble listened to the president: what will the exchange rate be until the end of the year?

On October 13, Russian President Vladimir Putin spoke about the reasons why he signed a decree on the mandatory sale of foreign currency earnings: for the budget of our country it is necessary for the dollar exchange rate to be “a little lower.” If “everything was normal,” then there would be no need for such a step. However, he added that the high dollar exchange rate does not indicate problems in the economy. As a result, at the end of the trading week on the Moscow Exchange, about 97 rubles were given for a unit of American currency, and a little more than 102 rubles for a euro. But analysts have different forecasts about what will happen next to the ruble. MK found out the arguments of optimists and pessimists regarding the fate of the national currency.

Optimists: “By the end of the year you can expect a dollar at 70-75 rubles”

Artem Tuzov, director of the corporate finance department of IVA Partners:

“On the second trading day after information about Putin’s decree appeared, the ruble continued to strengthen. At the same time, if on Thursday the national currency strengthened by more than 3%, then on Friday it decreased and this is already 0.22%. A sharp strengthening of the ruble is not beneficial, first of all, to the Russian budget, while the trend has been set. We can expect the national currency exchange rate to strengthen by the end of 2023 to the level of 70-75 rubles per dollar, as was the case in previous years. But in the coming weeks, the ruble may continue to slowly advance against the dollar. At the end of the month, on October 27, the Central Bank of the Russian Federation will hold a meeting on the key rate, and if the rate of strengthening of the ruble is insufficient, the regulator may once again raise it. In general, next week we should expect the national currency’s position against the dollar to strengthen to 95 rubles.”

Andrey Loboda, economist, director of communications at BitRiver:

“The dollar could theoretically return to the long-familiar quotes of 70-80 rubles for Russians at the beginning of 2024, before the presidential elections. This will be facilitated by the mandatory sale of foreign currency earnings by exporters, projected geopolitical events and their impact on the Russian economy, the drying up of new sanctions and the expected effective control over the outflow of capital from Russia.

Perhaps the strengthening of the ruble will be positively influenced by a new increase in the key rate of the Central Bank of the Russian Federation this year. But its effect on reducing inflation and the ruble will not be noticeable immediately, but with a certain time lag – most likely, again, by the beginning of 2024.

It is obvious that the government will take additional currency control measures to reduce capital outflow, and this will also be a plus for the ruble. Provided, of course, that world oil prices remain high, from $70 per barrel Brent and above. However, the ruble is unlikely to stay at these levels for long. This strengthening may be rapid, but it will also be as short-lived as it was in the summer of 2022. After the presidential elections, the dollar will most likely move into the 80-90 ruble corridor. Today we can only take comfort in the fact that the ruble remains a significantly undervalued currency and the real value of the euro and dollar is overestimated by 1.5 times – mainly due to geopolitical factors.”

Pessimists: “At best, the exchange rate will remain at its current level”

Yuri Kravchenko, head of the banking and money market analysis department of Veles Capital Investment Company:

“We do not expect further significant strengthening of the ruble on news of the mandatory sale of foreign currency earnings. With the presidential decree, the market, first of all, received a signal that at the reached maximums (100 rubles per dollar and above), further play against the ruble would meet resistance from the authorities. In addition, the mandatory sale of proceeds should increase the liquidity of the exchange market during non-tax periods, when exporters “leave” trading, and increase the supply of currency at times of increased demand for it. We believe that, at best, the exchange rate will stabilize in the near future in the range of 95-100 rubles per dollar

However, there is a fundamental potential for strengthening the ruble and it is associated not with administrative measures of a temporary nature, but with economic ones. Here the main hopes are for a tightening of the monetary policy (MP) of the Bank of Russia (that is, the expected increase in the key rate – N.T.), which should cool imports and maintain the trade balance of the balance of payments. However, even if by the end of this year or the beginning of next year the ruble strengthens moderately (for example, to the range of 85-90 rubles per dollar), citizens who bought the currency at a noticeably higher price should not be discouraged. Cash toxic currency will always be useful for foreign tourist trips, and its advance availability will eliminate the risks of exchange rate volatility (for example, as was the case in August of this year). In addition, the current strengthening of the ruble does not eliminate the likelihood of its next devaluation in the medium term. As practice shows, historical minimums for the ruble are updated with enviable regularity, so sooner or later it will be possible to sell the currency at a rate higher than the purchase price.”

Mikhail Vasiliev, chief analyst at Sovcombank:

“In the spring of 2022, a set of measures was introduced to stabilize the ruble exchange rate, including the mandatory sale of foreign currency earnings. This set of measures then made it possible to strengthen the domestic currency from 120 rubles to 60 rubles per dollar. However, we do not now expect a repeat of the 2022 scenario. We assume that the authorities are currently addressing the problem of stabilizing the exchange rate and preventing it from consolidating above 100 rubles per dollar, so we expect the ruble to remain at current levels until the end of the year.

Unlike the spring of 2022, when the last time the mandatory sale of foreign currency earnings was introduced, there are now no other effective measures to support the ruble that were in place then. In the spring of 2022, the authorities almost completely limited capital outflow, and the Bank of Russia raised the key rate to 20%. As a result, both citizens and businesses flocked to ruble assets (deposits, bonds), and imports (and the demand for foreign currency to purchase them) decreased significantly due to Western sanctions. Now Russian importers have established channels for the supply of goods, and many restrictions on capital outflow have been relaxed or lifted. Therefore, there will not be such strong support for the ruble from the demand for currency as last year. In addition, in 2022, the sale of foreign currency earnings was mandatory for all exporters, but now everything is decided manually. In our opinion, exporters are leaving a significant portion of their revenue abroad this year, including for objective reasons due to Western sanctions and increased costs of moving currency. Now the degree of influence of the new measure on the ruble exchange rate will depend on the effectiveness of control over the implementation of this decree. In this case, there will be no impact on the ruble exchange rate. Unlike previous episodes of tightening foreign exchange controls, it is now important not to interfere with the work of Russian businesses, which have built complex supply chains for exports and imports under Western sanctions.

Next week we expect the national currency rate to consolidate near current levels. The expected trading range will be 96-99 rubles per dollar, 101-104 rubles per euro.”

Dmitry Babin, stock market expert at BCS World of Investments:

“A drop in the dollar to 60 rubles is unlikely, since in conditions of an unprecedentedly strict sanctions regime and large budget expenditures, too high a ruble exchange rate is economically unacceptable. In addition, new measures aimed at returning export earnings to the country will likely have a limited effect on the ruble, including due to changes in the structure of exports. At the same time, the volume of imports and capital withdrawn from the country remains high, which maintains a high demand for foreign currency. Probably, by the end of the year the dollar may fall into the range of 90–95 rubles if the external market situation does not change significantly, as well as the geopolitical factor, as well as the sanctions regime.

Over the past three years (since October 2020), the ruble has fallen in value against the dollar by only 26%, that is, quite a bit, given the strong aggravation of the geopolitical situation that has occurred since then, a large number of anti-Russian sanctions, as well as the rapid growth of budget expenditures and the money supply. It’s just that last year there was an unjustifiably strong rise in the ruble’s price due to a temporary collapse in imports and record revenues from exports, which had not yet fallen under Western sanctions imposed later. Then the ruble exchange rate quickly returned to lower and economically justified levels. This created a false sense of too great a devaluation of the ruble. Now its rate is at a fair level in terms of the financial and economic situation.”