Free fall: the dollar weakened its position against world currencies

On Monday, March 3, the US dollar fell against the euro, the Japanese yen, the pound sterling, the Swiss franc, the Swedish krona and the Canadian dollar. How to explain the fall in the US currency, whether the Russian economy will benefit from this, and how world currencies will behave in the short and medium term, read the Izvestia article.

Typical volatility

On Monday morning, the European currency was trading at $1.0414 in the EUR/USD pair, which is lower than Friday's total of $1.0378. In the dollar/pound sterling pair, the British currency was worth $1.2602 (against $1.2579 on Friday). The yen/dollar currency pair from previous trading (150.62) showed a weakening of the "American dollar" to 150.32.

Traders explain the incident by the trade wars that the United States is unleashing against Mexico, Canada, the united Europe and China.

According to some of the experts surveyed, movements of the dollar index within 1% per day can be considered typical exchange rate volatility.

"In the current conditions, the factors in terms of which it is customary to describe the short—term dynamics of the dollar index have a secondary impact on the dynamics of the ruble exchange rate," says Dmitry Kulikov, director of the ACRA group of sovereign and regional ratings.

The Ministry of Finance of the Russian Federation did not respond to a request from Izvestia about how the weakening of the dollar could affect the Russian economy, and suggested contacting the Bank of Russia. The editorial board sent a request to the regulator.

Substantive conversation

Right now, it is difficult to say how stable the trend of the falling US dollar is, says Yulia Makarenko, Deputy director of the Banking Institute for Development.

She listed what could directly affect the situation. Data on the S&P and ISM business industrial indexes will be published during the week. This information will allow us to assess the state of the business climate in the United States, which will partly show the demand for money, the expert noted.

The promised duties of 25% on products that arrive in the United States from Mexico and Canada will also be earned. This is a powerful pro-inflationary factor, which can also shake the position of the US currency.

— The long—awaited report will be released - the Fed's Beige Book describing the current state of the US economy.In addition, data on the employment structure in the United States, the business index in the service sector, the state of unemployment and Nonfarm Payrolls (employment rate in non—agricultural sectors) will be published," comments Yulia Makarenko.

According to the financier, in this way, it will be possible to judge the positions of the US currency in detail, since it will be possible to rely on official data, and not on contradictory media reports.

Alternative from the inside

Even at the stage of the election race, Donald Trump announced a revolutionary project — the foundation of the US national reserve not in dollars, but in cryptocurrency. Against the background of this news, bitcoin jumped from $60-70 thousand to $90-100 thousand and above. In his recent social media post, the American president outlined fulfilling his election promise to make his country the crypto capital of the world. Trump intends to create a national reserve from cryptocurrencies such as bitcoin (BTC), Ethereum, XRP, ADA, SOL and others. After this statement, the listed cryptocurrencies skyrocketed in value. However, last week "crypta" collapsed amid the threat of new duties.

Nevertheless, the very existence of an alternative in the domestic market, available for settlements, undermines the position of the main US currency and the main global currency in general, according to Oleg Kalmanovich, chief analyst at Neomarkets. In addition, the list of candidates for inclusion in the US National Reserve is not entirely clear.

"Bitcoin, which was hoped for, briefly collapsed. The dollar's position has been shaken relative to almost all major world currencies. And if the documents are signed and implemented, the drop will be even more significant," the expert argues.

One of the goals of creating this asset, according to the analyst, is to reduce the burden of servicing the US national debt and, if possible, reduce the size of the national debt, which at the end of February amounted to $ 36.5 trillion. "And in order to prevent the dollar from falling excessively, Trump will try to cause an artificial stir around him. The toolkit is not rich, but it is effective: trade wars and direct threats against individual countries with an urgent recommendation to pay in US dollars in order to avoid sanctions. Similar threats have already been made against the BRICS countries in order to slow down and reverse the process of de—dollarization," Kalmanovich summarizes.

In favor of the ruble?

The weakening of the dollar and, as a result, the strengthening of the ruble, is due to a combination of several factors, said Dmitry Desyatnichenko, head of the Economics educational program at the Presidential Academy in St. Petersburg.

"Among them are the peak in the sale of foreign exchange earnings due to the end of the tax period, the successful adaptation of the business to the next package of sanctions and geopolitical news, which the market regarded as an important signal of the emerging defusing tension. The latter factor has become fundamental for the market, hence the scale and speed of the reaction, reflected in the dynamics of quotations. Any unexpected news will lead to high volatility in the market," he says.

According to the source, so far we will not see active intervention from the Russian financial regulator. "This is not required now. The current strengthening has a multidirectional effect on key financial indicators: on the one hand, it reduces budget revenues, exporters' profits and competitiveness in foreign markets, but on the other hand, it is an anti—inflationary factor. This is beneficial for importers, allows them to make money on the revaluation of foreign exchange reserves and reduces bond payments," the expert told the publication.

The strengthening of the ruble leads to serious losses for exporters and is generally positive for importers, said Olga Belenkaya, Head of the Macroeconomic Analysis Department at Finam. "At the same time, the ruble cost of imports is getting cheaper, which helps to slow down price growth in the domestic market. But there is an asymmetry in the transfer of changes in the ruble exchange rate to the value (when the ruble weakens, prices rise faster and more strongly than they decrease when it strengthens)," she says.

Thus, according to the analyst, the increased volatility of the ruble exchange rate during dollar exchange rate fluctuations is rather harmful to business, as economic uncertainty increases.