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Aug 7, 2022
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The ruble may not stand the test in August

August, this traditionally problematic month for Russia, can become a turning point for the ruble exchange rate. It seems that the factors that contributed to its continuous strengthening since March are beginning to weaken. In particular, imports will recover, exports will decline, oil prices will decline, and the effect of Western sanctions will intensify. The interviewed experts agree on this.

Mark GOIKHMAN, chief analyst at TeleTrade:

“It can be assumed that the ruble exchange rate has again returned to the long-term trend of gradual weakening. Fluctuations in both directions are not ruled out, but it is unlikely that the dollar will fall below 58 rubles in August, a rise to 64-65 rubles is more likely. Now the exchange rate is mainly affected by the ratio of foreign exchange earnings from exports and the demand for it from importers. The first of these factors is weakening: a barrel of Brent oil fell sharply from July 29 to August 4 – from $110 to $97 per barrel. One of the reasons is connected with the decision of OPEC +: on August 3, the countries participating in the deal raised production quotas by only 100,000 barrels per day, although they had previously increased by 648 bpd. Further, imports gradually increase – as stocks in trade and production are depleted. Especially, in anticipation of the end of the summer season, the return of people to current activities and purchases. It is also important that the government intends to return to the currency rule, that is, the purchase of foreign currency for rubles on the stock exchange. It is not yet in effect, but the very fact of its announcement affects the exchange rate, prompting investors to buy the currency now in anticipation of its future appreciation.”

Artem DEEV, head of the analytical department at AMarkets:

“For the ruble, oil quotes are traditionally important, which began to decline. The reason is the reduction in energy demand due to the slowdown in the economies of developed countries. In addition, the negative effect of sanctions is growing. According to the forecasts of the Central Bank, GDP will fall by 7-8% in the III quarter, and by 10-11% in the IV. This is a catastrophic collapse: in 2009 the Russian economy collapsed by 7.8%, during the default year of 1998 – by 5.3%. The current decline is comparable to the situation of the country’s transition to a market economy (1992-1994), when GDP fell by 12-14.5%. Under these conditions, the weakening of the ruble will be one of the ways to fill the deficit budget. Otherwise, the government will not have enough funds for the social sphere – medicine, education, etc. In August, we will see how the ruble is gradually losing ground against the dollar and will probably rise to 65-70 rubles. True, this will still be a process controlled by the Central Bank.”

Fedor SIDOROV, private investor:

“The trend for the ruble is in any case determined – the Russian currency will weaken. Otherwise, the profits of exporters and the budget, which receives less revenue, will suffer. The authorities have been talking about the fact that the Russian currency should be brought to a full justified rate for a long time, and we are talking about a completely understandable bar – 70 rubles per dollar. There are conditions. First, imports are gradually recovering. It was the inability to acquire the necessary raw materials, materials and components that created a situation of an overabundance of currency within the country, which strengthened the ruble. Now the situation will change, as parallel import programs will work. Secondly, the onset of a global recession (which no one denies) will lead to a weakening of the currencies of developing countries, including Russia. We are not cut off from global production, which means that inflationary processes will put pressure on the ruble.”

Vladislav ANTONOV, financial analyst at BitRiver:

“From the quarterly report of the Central Bank on monetary policy dated August 1, it follows that in the context of sanctions, the future of the ruble depends on the recovery of demand for foreign currency from importers. Import volumes are increasing, but not fast enough to eliminate the imbalance between supply and demand. Current geopolitical risks and the more distant but very real threat of a global recession also remain a source of uncertainty. The situation in the domestic foreign exchange market is also determined by a number of important factors. In particular, the Central Bank extended the restriction on cash withdrawals for 6 months and allowed banks to introduce negative rates on foreign currency accounts of legal entities. The regulator fears that unfriendly countries will impose sanctions against the Moscow Exchange and the National Clearing Center (NCC). If this happens, all client funds with the NCC will be frozen and exchange trading in dollars and euros will be stopped. In the coming weeks, the dollar / ruble pair will be in the range of 55-65.

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