When the dollar will cost 100 rubles: factors that could collapse the ruble exchange rate are named

The stock exchange week ended on the foreign exchange market with a weakening of the ruble exchange rate, albeit insignificant. Now the dollar has exceeded 91 rubles, and the euro has risen to around 99 rubles. Although in January the position of the national currency was stronger: the “American” fluctuated around 87-89 rubles, and the “European” – 96-97. Be that as it may, fears have once again arisen on the foreign exchange market about a possible collapse of the ruble, especially since memories are still alive of how the dollar exchange rate went off scale several times over the “hundred” mark last year. Could this scenario happen again in the near future? MK asked financial analysts about this: Vladislav Antonov (BitRiver), Mark Goikhman (Capital Skills) and Natalya Milchakova (Freedom Finance Global).

– Under what conditions can the exchange rate reach 100 rubles per dollar again?

Antonov: “There are six possible reasons for the weakening of the ruble to 100 rubles per dollar:

Firstly, a decrease in prices for energy resources, from the sale of which Russia receives its main income, which will lead to a decrease in foreign exchange earnings.

Secondly, an imbalance in the foreign exchange market caused by a decrease in the volume of foreign currency sales by exporters and an increase in demand for it from importers.

Thirdly, the Central Bank will reduce the sale of foreign currency from the National Welfare Fund after February 6, which will reduce the supply of foreign currency.

Fourth, an increase in government spending at the beginning of the year, which will cause an increase in the budget deficit.

Fifth, the strengthening of the dollar due to rising US government bond yields on expectations of the Fed maintaining high interest rates in the 1st quarter.

Sixth, a possible reduction in the key rate of the Central Bank of Russia to 10-12% per annum with inflation slowing from the second quarter over 2-3 meetings, which will reduce the attractiveness of ruble assets.”

Goikhman: “The dollar exchange rate will likely reach 100 rubles. So far, many circumstances are stopping him. In particular, the mandatory sale of foreign currency earnings by exporters, introduced in the fall, increases the supply of foreign currency. It is complemented by the sale of currency from the National Welfare Fund (NWF) in January 2024. An increase in the key rate of the Central Bank of Russia to 16% relatively reduces the demand for money, which curbs inflation and, as a result, the depreciation of the ruble. Decline in the growth rate of imports and demand for foreign currency after the New Year holidays. Some restraint in the provision of ruble liquidity to the market by the Central Bank of Russia. There is a well-established opinion among market participants that the ruble will be artificially supported until mid-March.

If these drivers stop working or weaken, the ruble will weaken. In addition to them, the conditions for “taking a hundred” may be a decrease in oil prices with the threat of economic slowdown in leading countries. A relative reduction in the influx of hard currencies into Russia due to restrictions on exports and payments for them. Strengthening of the dollar in the world if the US Federal Reserve maintains high interest rates for a long time. An increase in the Russian budget deficit, which will stimulate the need for a lower ruble exchange rate. Accumulated inflation in the economy, even if its rate is lower than in 2023. Any “black swans” are force majeure circumstances that are difficult to foresee.”

Milchakova: “We believe that in 2024 this is possible. In order for the dollar to once again have an open path to 100 rubles, it is necessary to at least first cancel the mandatory sale of foreign currency earnings by exporters. It is unclear whether this requirement will be lifted after April 30, as planned, or not. If they cancel it, the dollar will not immediately return to 100 rubles; for this, other factors must influence the exchange rate. For example, if world oil prices fall well below $70 per barrel, the dollar is likely to rise to 100 rubles. Also, the growth of the dollar may be facilitated by renewed large-scale purchases of foreign currency from the National Welfare Fund in the absence of mirroring of this operation by the Bank of Russia. There may also be completely unexpected “black swans”, most likely from the sphere of geopolitics or new sanctions that will negatively affect the ruble.

– Could such a weakening of the ruble happen in February, and if not, then when?

Antonov: “Reaching the rate of 100 rubles per dollar in February is unlikely. Before the presidential elections in March, it is unlikely that a sharp weakening of the ruble will be allowed. In any case, they intend to extend measures on the mandatory sale of export proceeds, maintaining the supply of currency. Rising oil prices due to fears of disruptions in the supply of “black gold” will also support the ruble.

A more realistic scenario is the weakening of the ruble to 100 per dollar by the end of 2024. The key risks are the imposition of negative trends and the subsequent easing of the Central Bank’s monetary policy. And here it must be added that the weakening will be rapid when all negative factors appear at once. In the second half of the year, the Central Bank will soften monetary policy, which also puts pressure on the ruble.

So far, the fastest weakening of the ruble against the dollar by almost 25% occurred within 39 trading days – from May 11 to July 6, 2023 from 75.23 to 93.85 rubles. If history repeats itself, the dollar exchange rate will reach 100 rubles by March 5th. But let me emphasize: now there are no factors that could weaken the national currency so much.”

Milchakova: “I believe that as long as there is a mandatory requirement for exporters to sell foreign currency earnings, this will not happen. This means that in February the exchange rate of 100 rubles per dollar is practically impossible. If this requirement for exporters is canceled after April 30, the dollar, especially under unfavorable external factors, may return to 100 rubles in the summer, for example, in August, which is often unfavorable for the ruble, or closer to the end of the year, when the population’s demand for currency. However, if the requirement for the sale of foreign currency earnings by exporters is maintained until the end of the year, and no unexpected “black swans” arrive, then the dollar’s ​​rise to 100 rubles will most likely be postponed until at least 2025.”

Goikhman: “The above negative factors will probably not be significant in February. This month we can hardly expect an exchange rate of 100 rubles per dollar. In particular, the Central Bank is expected to lower the rate after inflation stabilizes only in the second half of the year. Or the abolition of the mandatory sale of foreign currency earnings by exporters, if it happens, then only in April. The increase in the excess of budget expenditures over revenues may occur gradually in subsequent months. Foreign economic risks are also not acutely evident at the moment. However, if these and other negative circumstances occur, the dollar may strengthen to 100 rubles closer to the end of 2024 and the beginning of 2025.”