Central Bank: lags in the receipt of foreign exchange earnings from oil prevent the strengthening of the ruble
Despite high oil prices, the ruble exchange rate remains weak. As the Central Bank explained, growth is currently hampered by lags in the receipt and return of foreign currency earnings from exporters. The regulator stated that the ruble exchange rate continued to be determined by the trade balance; additional pressure was exerted on it by the strengthening of the dollar against most world currencies due to the global trend of risk aversion.
As indicated in the traditional commentary “Monetary conditions and the transmission mechanism of monetary policy,” the ruble weakened again in September. “The current increase in hydrocarbon prices and a decrease in the discount did not provide noticeable support to the ruble against the backdrop of lags in the receipt and return of foreign currency earnings to the Russian market,” the Central Bank stated.
On Monday, October 9, the dollar exchange rate exceeded 102 rubles for the first time since March 2022. Over the course of a few days, the ruble was able to strengthen slightly. By the evening of Wednesday, October 11, the Russian currency rose slightly, but still continued to remain around the 100 ruble mark per dollar. As noted by BCS World of Investments analyst Dmitry Babin, the psychological mark is a serious trigger for many market participants, since previously the authorities “on reaching this mark intensified discussions about measures to stabilize the ruble exchange rate.” “In addition, such “round” levels are psychologically important for many, provoking transactions,” he noted.
As Evgeniy Kogan, a professor at the Higher School of Economics, said, the ruble is weakening due to the fact that Russian exporters receive foreign exchange earnings in dirhams, yuan and rupees. “Our imports require dollars, euros, and so on, with which we can buy something serious. We can buy good tea for rupees, fabrics, gingerbreads, incense sticks, but you can’t buy components for rupees,” he noted.
Analysts believe that the exchange rate can be stabilized. Senior Lecturer at the Department of Banking at Synergy University Andrey Sirotkin explainedthat the share of the dollar and euro in Russia’s foreign trade turnover is large, and this plays into the hands of exporters. “Moreover, instead of converting the received currency (after selling energy resources abroad), exporters leave it in foreign bank accounts. This is due to the tightening of foreign exchange policy within Russia. As a result, there is a shortage of foreign currency on the Russian market. This is also why the ruble is falling today,” he said.
According to Sirotkin, one of the ways to solve this problem could be the introduction of a special currency corridor – a strictly limited range of possible exchange rate fluctuations. “I think that the Central Bank has no choice but to use this tool,” he concluded and called raising the key rate an ineffective measure.
What to expect from the ruble exchange rate in the future?
Predictions regarding the future of the ruble still differ. As, for example, candidate of economic sciences and financial analyst Mikhail Belyaev said, the downward trend of the ruble against the dollar will continue. “Since our economy is on pause, and all its positive characteristics are due only to the fact that the military-industrial complex is working at full capacity, and the business corps is on pause, we see a consistent decline in the ruble against the dollar over the course of four to five months “, he noted. At the same time, the expert is confident that the American currency will continue to strengthen in the future, but the dollar has a limit.
Considering that our economy is still not zero and is somehow moving, I think that for now the limit is somewhere around 110 for the next two to three months
Russian Presidential Assistant Maxim Oreshkin spoke more vaguely on this matter. When asked when measures to strengthen the ruble would begin to work, he answered: “Sooner or later, the dollar will stop strengthening and the ruble will stop weakening.”
For his part, Deputy Chairman of the State Duma Committee on Economic Policy Artem Kiryanov suggested that in the coming years the ruble exchange rate against the dollar will be in a fairly large corridor. “This will be a corridor from 80 to 95. This is a very wide corridor, but it will allow us to maneuver in terms of achieving our technological sovereignty,” he believes.
Predictability and calm
The predictability of the national currency exchange rate is important to the Russian authorities. As Finance Minister Anton Siluanov said, the ruble exchange rate may differ from the forecast included in the draft budget due to external conditions, but it must be predictable for participants in foreign economic activity.
We are really saying that the exchange rate should be predictable for our participants in foreign economic activity – be it exporters or importers. I always say that some people benefit from a weak exchange rate, others from a stronger one. The Ministry of Finance and the government benefit from the predicted exchange rate.
According to the head of the Ministry of Finance, the draft budget for the next three years plans for an exchange rate of 90 rubles per dollar. At the same time, various factors influence the volatility of currencies.
The Kremlin, in turn, insists that the national currency exchange rate should not cause concern and it is time for Russians to get used to life in the ruble zone. According to presidential press secretary Dmitry Peskov, excessive attention to the dollar exchange rate is possible from an emotional point of view. “You need to get used to living in the ruble zone and not feel so dependent on the dollar exchange rate,” he stated. Peskov also pointed out that macroeconomic stability is fully ensured by “the actions of the macro regulator and the government.”
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