Euro and dollar exchange rates hit new highs since March 2022
During trading on Wednesday, August 2, the dollar and euro jumped to record highs. In morning trading on the Moscow Exchange, the European currency exceeded 102 rubles, and by the end of trading it was already worth more than 103. Compared to the closing price of the previous trading day, the European currency rose by 1.749 rubles (plus 1.72 percent). At the same time, the dollar also rose in price: the value of the American currency exceeded 94 rubles.
For all major currencies of Russian foreign trade, these values have become a record since March 2022. At the same time, at the beginning of July, experts promised the ruble a rapid growth. Analysts assumed that in the medium term the rate would be in the corridor of 80-90 rubles per dollar. Some still believe that the weakening will not last long.
Why are foreign exchange rates rising?
The main factor affecting the Russian currency under the current restrictions of the Central Bank (the maximum amount of currency withdrawal, the ban on withdrawing cash dollars and euros from accounts) remains the ratio of imports and exports in monetary terms. The latter primarily depends on oil and gas revenues. Russia’s export earnings until February 2022 amounted to $35-40 billion per month. In April-May 2023, they dropped to 12 and 11 billion, respectively. By estimated Ministry of Finance, oil and gas revenues of the budget of the Russian Federation in January-June decreased by 47 percent compared to the same period last year and amounted to 3.38 trillion rubles. In general, revenues to the budget were lower than last year by 12 percent, amounting to 12.38 trillion rubles.
12.38
trillion rubles
amounted to oil and gas revenues of the Russian budget
The department explained that this was due to the high comparison base of last year, lower prices and reduced volumes of natural gas exports.
Another factor in the weakening of the ruble is the change in the trade balance: the rate depends on the inflows and outflows of currency into and out of the country, Finance Minister Anton Siluanov said.
The weakening of the ruble exchange rate is primarily due to the trade balance – the inflows and outflows of currency into and out of the country. Plus, summer is the time of holidays, when someone travels abroad, the demand for currency is also growing.
In addition, the situation is aggravated by the ongoing withdrawal of foreign currency not only by non-residents leaving assets in the Russian Federation, but also by Russian persons. “The ruble is weakening in the absence of currency supply. Demand for currency is presented by importers, big business as part of the buyout of shares of unfriendly non-residents. Part of the currency settles on foreign accounts, trading volumes on the stock exchange remain low,” — explained Sergey Konygin, Senior Economist at Sinara Investment Bank.
Another factor was the restoration of supplies from abroad and the reduction in prices for Russian goods in the world. At the same time, the demand for cash in the summer increased due to the holiday season, a decrease in business activity and political risks, due to which dollars and euros were bought as a store of value.
What awaits the ruble in the future
Some analysts are confident that the current decline will be temporary for the Russian currency. How speaks Mikhail Zeltser, expert on the stock market at BCS Mir Investments, the ruble will be able to restore its positions in August.
Estimates do not change: expectations for August are still reduced to the recovery of the ruble and the fall of the dollar below 90, and the euro under 100
Others assume that this year the euro may rise to 105-110 rubles, the dollar is predicted to rise to 96 rubles. Egor Zhilnikov, chief analyst at Promsvyazbank (PSB), explained that the key driver of currency growth against the ruble remains concerns about the imbalance in demand and supply of currency on the market, caused by the lack of signals for improving the state budget.
Most likely, in August, the dollar will fluctuate within the range of 90-95 rubles, and the euro – 99-104 rubles
The Russian authorities emphasize that a predictable ruble exchange rate is important for the country. “You will say that the budget is good from the weak ruble, we get more additional income. Yes it is”, – confirmed Siluanov, noting at the same time that the exchange rate has an impact on inflation, on the unprotected segments of the population. “More money will be needed to support people – indexation of benefits, salaries, and other social payments from the budget,” he stated.
The ruble is now benefiting from the rise in oil prices on world markets and foreign exchange interventions under the budget rule, but this is not enough to meet the increased demand for foreign currency to purchase imports. “The rise in oil prices and the narrowing of the price spread between Brent and Urals translate into an improvement in the position of the ruble with a time lag, most likely closer to autumn,” — concluded investment strategist at BCS Mir Investments Alexander Bakhtin.
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