Why the ruble strengthened against the dollar and the Euro :: Finance :: RBC

The Russian currency played a part a sharp drop in the dollar and the Euro have returned to levels 4 and 5 September. The rate affects the suspension of sales by non-residents on the OFZ market and the decision of the Central Bank of Turkey rate decision

Photo: Artyom Geodakyan / TASS

The ruble on Thursday, September 13, strengthened against foreign currencies. At the opening of trading, the dollar fell by 40 cents and continued to fall in price. In the middle of the day, the ruble briefly crossed the level 68 RUB down, but in the evening weakened and at 19:30 GMT was trading against the dollar at the level of 68,36 RUB (minus 67 kopecks to the previous day’s close). At the auction on the Euro there was a similar picture, although the promotion was not as strong: at 19:30 GMT, the Euro gave 79,8 RUB (minus 43 COP.) when made in the course of trading the minimum 79,04 RUB.

Formal strengthening of foreign currencies against the ruble by about 40 COP. began after the announcement of the US state Department that the second part of the sanctions associated with poisoning in British Salisbury ex-GRU officer Sergei Skripal and his daughter Julia, would be “harsh” and will affect the Russian banking sector. In General, for Wednesday and Thursday, the rouble played a sharp fall in the beginning of September the Euro has returned to levels of 5 September, and the dollar — levels on 4 September.

Sharp fluctuations in the Russian currency market almost did not stop since the beginning of August — they started after the USA announced the introduction against Russia of new sanctions “case Skripal”. At the same time was published the Senate’s bill, which provided for the imposition of restrictions on the banking sector and investments in the Russian OFZ. At the peak of the Euro was close to 82 rubles (10-11 September), the dollar at the same time exceeded 70,5 RUB.

Why the ruble strengthened

The main driver of ruble — ending waves of sales of the most liquid Russian assets, the holders of which a high proportion of non-residents (Russian OFZ bonds and shares), said the company “BCS” Denis Gabdulin. An additional factor was the meeting of the Central Bank of Turkey, the results of which the rate increased to 24% (instead of the expected by analysts 22%), he adds. This step of the regulator has increased the demand for emerging market currencies overall, which could not be reflected in a further weakening of the dollar against the ruble.

The increase rate of the Central Bank of Turkey had created a positive background for all currencies in emerging markets, agrees the senior analyst of “Aton” on macroeconomics and debt markets Yakov Yakovlev. However, this is clearly not the main reason for the strengthening of the Russian currency, the expert said, Recalling that the consolidation continues for the second day. In his opinion, the trend is associated with the cessation of aggressive sales OFZ and recovery of the quotations of government bonds. However, to talk about the end of capital flight even earlier still OFZ yield of 7,2-7,5% today few people are interested as growing yield dollar-denominated debt instruments, says a leading analyst “Discovery Broker” Andrei Kochetkov.

Of positive news that could affect the exchange rate, it can be noted yesterday’s meeting of the Senate banking Committee of the U.S. Congress, where there were discussed the most stringent sanctions measures associated with restrictions on dollar payments of Russian banks, from which we can conclude that this option is not considered as a primary, says Yakovlev.

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The strengthening of the ruble in the last three days (including today) passes without any significant positive newsflow, analysts at Promsvyazbank Michael Poddubsky. To the beginning of the week the ruble OFZ market was significantly oversold and now there is a “corrective recovery”, he said. According to Podolskogo, the ruble is now undervalued, but on a fundamental assessment of the market is now able to ignore the volatility is high and the betting is very emotional, values are primarily due to external factors (sanctions subject, the worsening situation in Syria, General mood of investors in relation to emerging markets), the expert concludes.

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Rate of the Central Bank will not affect the course

The value of the Bank of Russia key rate, which the regulator will announce the results of the meeting of the Board of Directors on September 14, should not significantly affect the foreign exchange market, agree experts interviewed by RBC.

Central Bank likely to leave rates unchanged (7.25 percent), however, he must significantly toughen the rhetoric, however, it will not affect dramatically on the currency market, says Poddubsky of PSB. If rate will increase, it could be a positive factor for the rouble, but only if the market does not perceive this move as the beginning of a series of rate increases, says the analyst. If this happens, it can cause an active outflow of capital from BFL, warns Poddubsky.

The gap in yields of ruble and the dollar in the cases of rate hike by 0.25 percentage points is not significantly reduced, and therefore, the motivation of global capital will not change, warns Kochetkov from “Opening Broker”. Most likely, the Bank will be limited to rhetoric, pointing to risks of a fall, which can lead to higher rates, respectively, optimism this week would end, and speculators will return to the negative expectations of external signals that may appear in abundance, predicts Kochetkov.

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