The strengthening of the Russian currency was considered unstable: it will begin to weaken again

Analyst Belyaev: “Soon the ruble will return to its old ways”

The ruble has finally moved from its “dead point”, which was 97 per dollar for many weeks. Analysts explain its exchange strengthening to 95.32, first of all, by the influence of the presidential decree on mandatory repatriation and sale of foreign currency earnings by exporters. That is, a strict administrative measure. Meanwhile, the future fate of the Russian national currency remains in question, since the manual, situational mode of exchange rate management is far from a panacea for the risks of destabilization.

However, for now it is quite possible to be happy for the ruble, which on Friday, October 20, confidently rose against the main currencies on the Moscow Exchange – to 95.32 per dollar and to 100.85 per euro. Moreover, a day later, the head of the Ministry of Finance, Anton Siluanov, made an encouraging statement. According to him, the authorities “have the tools to influence the rate to be predictable and sustainable.” The minister recalled that recently the state had decided on certain measures to control the return of foreign currency earnings. Siluanov does not see any prerequisites in the economy for the exchange rate to “fly away” somewhere far and for a long time.

Plus, at the meeting on October 27, the Central Bank will almost certainly raise the key rate – as analysts suggest, to 14% per annum. Previously, representatives of the regulator repeatedly hinted at such a step, since inflation is growing faster than the Central Bank’s annual forecast. Against this background, the ruble may strengthen further. However, by and large, the answer to the conceptual question is important: are the authorities really able to twist and turn the course as they want, to adjust its parameters at their discretion? Or are there force majeure circumstances that make the task obviously impossible?

“What happened to the ruble was exactly what the markets were waiting for: from October 16, exporters were obliged to credit at least 80% of foreign currency earnings to Russian accounts within 60 days from the date of receipt, and then sell at least 90% of these funds on the domestic market,” – says financial analyst Sergei Drozdov. – And now, apparently, the rate has begun to move towards the border of 92.5-93 rubles. Probably, this mark will be reached next week, and then even brighter prospects will open for the ruble – a chance to reach 87 per dollar. And if the Central Bank raises the rate, as indicated by its current “hawkish” rhetoric, this may further affect the situation.”

Any central bank in any country has tools to influence the exchange rate. As it is sung in the song of the once cult film magazine “I want to know everything”: “if you have the desire, knowledge will come to you.” When there is a desire, the regulator may well carry out currency interventions and rein in speculators so that they do not play against the ruble. According to Drozdov, this year the process of weakening the Russian currency was not of an uncontrollable, force majeure nature, unlike the events of February-March 2022, when non-residents were still present in the foreign exchange market.

Financial analyst, Candidate of Economic Sciences Mikhail Belyaev takes a fundamentally different position. The exchange rate is formed in the depths of the economy and depends entirely on its condition and efficiency, notes MK’s interlocutor. In Russia, the economy is on pause; its external statistical successes are due, first of all, to the active work of the military-industrial complex. Which, in turn, receives money from the budget, but spends it only on itself, without being included in the final cycle of capital circulation, depriving markets, consumers, and other sectors. Yes, formally, according to Rosstat, the economy is growing, but these indicators are deceptive. And the ruble, precisely due to underlying economic circumstances, has been continuously weakening since May of this year.

“As for the decree on the mandatory sale of foreign currency earnings by exporters, this is a purely opportunistic measure,” Belyaev believes. – With its help, you can only smooth out the speculative component of the ruble exchange rate, remove any alarming expectations that were pushing the dollar up. In numbers, this is expressed as just two or three rubles strengthening per dollar. And since the fundamental factors have not gone away, very soon the ruble will return to its old ways and will gradually weaken.”