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- Fall down - get up: will the Central Bank's measures help to curb the ruble's decline?
Fall down - get up: will the Central Bank's measures help to curb the ruble's decline?
The suspension of daily currency purchases by the Central Bank until the end of the year has already helped stabilize the situation with the ruble exchange rate, which has been approaching historic lows in recent days. At the trading on November 28, it strengthened to 108 per dollar, but in the near future the rate is unlikely to fall back to double digits. Difficulties with export payments, geopolitical tensions and a shortage of currency on the domestic market are putting pressure on the ruble, and it will not be easy to recoup this negativity. What other measures the authorities can take and whether they will do it - in the material of "Izvestia".
How the Central Bank's measures will affect the ruble exchange rate
The trend of rapid weakening of the ruble broke on November 28 - during the day it strengthened to 108 per dollar, 114 per euro and 15 per yuan, according to TradingView data.
At the same time, the ruble collapsed a day earlier - the major currencies approached the historical highs of 2022, which were associated with the start of Russia's special operation in Ukraine. On November 27, the national currency reached 114.5 rubles per dollar, 120.5 per euro and 15.8 per yuan.
The night before, the Central Bank decided to stop buying foreign currency on the market until the end of 2024, which it conducts to mirror regular operations of the Ministry of Finance (the department conducts them under the budget rule). At the same time, the regulator will continue to sell foreign money in the amount of Br8.4 billion per day.
The Central Bank's measures are designed to increase the supply of foreign currency in the domestic market, which should eventually reduce its quotations and stabilize the situation with the ruble.
The actions of the Bank of Russia can remove up to a third of the demand for foreign currency in the Russian Federation and significantly reduce the rate of decline of the ruble against the dollar, according to economist Andrei Barkhota. Similar measures have already been taken by the authorities in the early 2000s, and then they had a fairly quick effect.
To some extent, the Central Bank measures have already helped stabilize the situation, said analyst David Grigoriev of Gazprombank Investments. However, in the end, the supply of currency in the Russian Federation depends on the situation with exports, which has been hit due to the complication of cross-border settlements. The situation may be resolved in the coming months, but until then the fair price of the ruble to the dollar will not be below 100, the expert expects.
The introduction of sanctions against banks (in particular, Gazprombank) has further complicated the repatriation of capital and led to an even greater shortage of supply of currency - which leads to a weakening of the ruble, said the MC "Alfa Capital". This means that exporting companies accumulate currency outside Russia, and the exchange rate inside Russia is determined by the "truncated market".
What other measures the authorities can take to support the ruble
If the effect of the Central Bank's actions on the currency market is insufficient, it is possible that a stricter regime of compulsory sale of foreign currency proceeds will return to strengthen demand for the ruble, says Andrei Barkhota. In spring 2022, exporters were obliged to sell at least 90% of earnings from the sale of raw materials and goods on the domestic market, but since then the norm has been reduced to 25%.
However, this step is unlikely - now it would not be so effective, said Alina Poptsova, stock market analyst at Alfa Capital Management Company. She explained: under the new sanctions exporters are much more difficult to return currency to the Russian Federation just because of problems with cross-border payments, so this measure can only aggravate their situation.
To stabilize the ruble, the Central Bank may introduce new restrictions on the withdrawal of capital from the country, said Alina Poptsova. For example, additionally limit the limit of transfers abroad (now it is $1 million) to curb the demand for foreign currency from friendly foreign banks.
Also more realistic is the temporary suspension of currency sales from the National Welfare Fund (NWF), added in "Alfa Capital". Now the Ministry of Finance buys foreign currency and gold from the market in the amount of 3.1 billion rubles a day, which negatively affects the ruble exchange rate.
In addition, a weak ruble is beneficial for exports, and therefore for budget revenues - and the authorities do not hide it. The more companies earn in ruble equivalent, the more taxes they will pay.
"I'm not saying the exchange rate is good or bad. I'm just saying that today the exchange rate for exporters is very, very even conducive to exports," Finance Minister Anton Siluanov said on November 26 at the plenary session of the IX International Forum of the Finance University.
Will the dollar continue to grow further
Theweakening of the exchange rate is not due to fundamental factors - the trade balance is now quite strong, said November 27, Minister of Economic Development of the Russian Federation Maxim Reshetnikov. According to him, there is now an excessive emotional component in the currency market, but after increased volatility, the rate will stabilize.
Apparently, the market on the eve simply faced panic - this is evidenced by a strong but temporary fall in the ruble, said an expert on the stock market "BKS World of Investments" Michael Zeltser.
Some banks are now recording an increase in demand for cash currency - in "Zenith" it has tripled in recent days, said "Izvestia" representative of the organization. At the same time, RSHB and VTB have not noticed an increase in interest in such operations.
Theruble exchange rate may still remain very volatile, said David Grigoriev of Gazprombank Investments. It is not excluded that the dollar may jump up to Br120.
Medium-term prospects for the ruble are not too rosy, said analyst of FG "Finam" Alexander Potavin. Toward the end of the year, the Ministry of Finance will significantly increase budget expenditures, and free rubles on the market will be even more, because of which their value may fall further.
Geopolitical aggravation puts additional pressure on the national currency, said Mikhail Zeltser. The EU has started working on the 15th package of sanctions against Russia, which may strike a blow to the "shadow fleet. Because of this, it may be necessary to increase the discount on Russian oil, which means that less currency will enter the country.
On the other hand, now the ruble is undervalued, and the trend of growth of overbought dollar and euro can be corrected at any moment, the expert said. Finam" agrees with this opinion. They expect that in the next month, the pair USD / RUB will not go beyond the limits of 100-110 rubles.
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