Aug 5, 2022
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The dollar exchange rate is relevant again: the best times for the ruble are over

The dollar exchange rate is relevant again: the best times for the ruble are over

Photo: Dmitry Rogulin/TASS

Analysts unanimously assert that in August the ruble exchange rate is expected to weaken, which will continue in the fall. On Wednesday, August 3, the ruble exchange rate on the Moscow Exchange settled at 60.39 against the dollar and 61.25 against the euro, but, according to experts, by the end of the month, the “Russian” can reach 67 against the dollar, and by the end of autumn – up to 70. Economists cite the recovery of imports, the decline in exports, and the discussion of a new fiscal rule as the main reasons.

Over the past six months, the ruble exchange rate has experienced amazing metamorphoses from the “bottom” around 120 per dollar to multi-year peaks of about 50. In this regard, some politicians even began to say that the dollar exchange rate for ordinary Russians, in principle, no longer matters – in connection with the sanctions imports have declined, and the state will support domestic producers and compensate for all the jumps, so prices allegedly no longer depend on the exchange rate. As a store of value, the dollar has also become a toxic asset – you can’t withdraw more than 10 thousand, and more and more banks charge a commission for servicing foreign currency accounts.

Nevertheless, it will not be possible to completely forget about the dollar exchange rate. Despite the fact that in March there was a jump in prices, after the strengthening of the ruble to 50, as you can easily see, they did not return to the previous level. But, as he explained to the Free Press Head of Finance and Economics at the Institute of Contemporary Development Nikita Maslennikovwith a new depreciation, even to 70, there may be another rise in the price of imported goods, which have no analogues on the Russian market. For example, the same coffee or chocolate, the raw materials for which must be imported from abroad. And in general, the state of the foreign exchange market in one way or another reflects the state of the Russian economy.

“The dollar exchange rate is a fairly adequate idea of ​​the measure of value in the global economy,” says Nikita Maslennikov. – The same oil and gold are valued in dollars. Therefore, the course must be closely monitored, another thing is that it is not of such fundamental importance for current life as it was at the beginning of the decade. Nevertheless, the rate is important because it shows the “average temperature” of our and global economies, foreign economic relations.

Before our eyes, the configuration of the world monetary system is rapidly changing, it is becoming less predictable. The question arises as to what tomorrow will be the universal equivalent of value. As long as the dollar stands in these positions, it will gradually lose them, but this is a long process, it will take 10-15 years.

In addition, it also makes practical sense to monitor the dollar exchange rate, because the classic “pass-through effect” of the ruble depreciation to domestic prices does not go anywhere. If the ruble weakens, you need to understand that in two or three quarters this will be transferred to the dynamics of domestic prices.

This does not always happen immediately, the Central Bank has a huge number of tools to smooth out these exchange rate fluctuations, however, the pattern remains unshakable. With the growth of the dollar, there is no need to panic about where to run and buy something urgently, but you need to follow it, because it allows you to navigate the economic space. The course is one of the important components of the system of economic coordinates. Therefore, it is also important for our financial authorities to find an equilibrium state of the ruble, which would not draw too much attention to itself and would not lead to price fluctuations. While we are approaching this, I think that this year the effect of the ruble balance will be achieved.

SP: At what level?

– In August, it will most likely be the level of 60-65 to the dollar. Some colleagues believe that the ruble may fall to 67, but I remain a supporter of the fact that the ruble will remain in this corridor. At the moment, he can jump out for him – during the tax period and with growing oil, go to 58-59 to the dollar. If the tax period ends, and oil fails, the rate will be 67-68.

As imports recover, the channel for generating demand for the currency will expand, and this will push the exchange rate up. In this case, the transition from the corridor 60−65 to the corridor 65−70 is real. It is difficult to draw further conclusions, since we have too little information about what is happening with the dynamics of import recovery, while parallel imports are not developing as fast as we would like.

The second channel that pushes the demand for currency is the development of shuttle trade. Over the past few weeks, there has been an increase in the demand of the population for foreign currency loans. The question is why? Obviously, to ensure trade shuttle operations. If you buy something in the same Kazakhstan, dollars and euros are preferable to rubles and even yuan.

“SP”: – And the growth of the dollar will affect the rise in prices? Or have they already added as much as possible?

– The spring surge of the exchange rate, when the levels reached 120 per dollar and 130 per euro, naturally, was transferred to the current inflation. But curiously, the weakening of the ruble to 60 per dollar is already reflected in the deceleration of the decline in inflation. Therefore, for the time being, I would not talk about the inevitable rise in prices, but we can talk about slowing down the decline as a risk. Annual inflation will be within the range of 12-15%, but it is not yet clear which border it will be closer to.

Locally, prices at the current rate will rise for goods that are almost entirely dependent on imports, such as coffee, chocolate or tropical fruits. It is very likely that we will face this by autumn. In addition, logistics may become more expensive. As for the rest of the goods, time will tell, but there is a feeling that the linkage of the pass-through to domestic prices is starting to recover again.

– In the current conditions, the ruble will gradually weaken, – I agree financial analyst Alexander Egorov. – This is due to the activation of imports and the possible return of the budget rule. This movement may not be very directional, since exporters make the weather on the local market. On the one hand, they are interested in the weakening of the ruble, on the other hand, as soon as the dollar rises to a certain level, they start selling it, because foreign exchange assets carry a tinge of toxicity. The general trend is towards the weakening of the ruble in the range of 60-70 in August and by the beginning of autumn.

Further, much will depend on what mechanism the Ministry of Finance will offer for a clear impact on the market. Then it will be easier to talk about its dynamics. But in general, the second half of autumn, I think, will also pass within the framework of a weakening trend. The best times for the ruble have already passed, now it is coming to a more balanced state.

Moreover, the Central Bank predicts a decline in GDP in the third quarter by 7% after a decline in the second quarter by 4%. This is an unhealthy trend, along with rising inflation, it is not in favor of the ruble. If in the first half of the year the free floating ruble was tightly regulated by the balance of payments, in the second half of the year more market mechanisms will reflect the state of the country’s economy, which will also lead to a weakening of the national currency.

“SP”: – Do all these exchange rate fluctuations matter to ordinary Russians?

– The general pattern is that the weakening of the national currency leads to an increase in inflation. I think that the current weakening of the ruble will not be an exception. Parallel imports will improve, but this does not mean that imported goods will become cheaper. In simple terms, new imports will come, demand for it will recover, but if the ruble weakens, prices will also rise. Therefore, the weakening of the ruble will have a negative impact on the population, certain categories of goods will rise in price, even if they begin to regularly enter our market.

“SP”: – That is, it still makes sense to follow the course?

– Of course, there is a difference between the dollar exchange rate of 120 and 50 rubles, this is either a state of panic or an unhealthy calmness. Tracking the exchange rate of the national currency has become one of the points of financial literacy, a certain financial culture. The Russians, according to the Central Bank, have $85 billion, which is a significant amount; for many, this is savings, and the amount of these savings varies depending on the exchange rate.

Therefore, the topic of the dollar will not cease to be relevant. Perhaps there will be growing interest in the yuan and other alternative currencies, such as the Hong Kong dollar. When the Dirham of the Arab Emirates appears on the Moscow Exchange, it will also attract attention as a currency of a stable economy and an alternative to assets. Interest in the foreign exchange market is justified, since it accumulates the general state of the economy.

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