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Sunday, December 4, 2016

The ruble may have reached its peak


For the first time in seven months the price of Brent crude oil managed to consolidate above $ 50 per barrel. Then, on the background of the fall of the dollar and the Euro gets stronger and the Russian ruble, although not as significantly. It seems that the best time to buy foreign currency had occurred. There are a number of indications that soon after the fall of the ruble may resume.

The price of Brent crude oil for the first time since 4 November 2015 exceeded 50 dollars per barrel. By 15.15 GMT, Brent crude reached a value of from 50.36 per barrel, WTI also rose to its highest level since November 2015 and reached 50,09 per barrel.

“65 to the dollar for the Euro and 70 seem a good time to buy a currency. In the first case, the goal has been reached and the second not yet

Oil rises in price on the background of statistics from the United States. On the eve of the US Department of energy reported that commercial oil stocks declined for the week – from 16 to 20 may by 4.2 million barrels to 537,1 million barrels. The analysts expected reduction of stocks of 2 million barrels. The day before participants of the market was inspired by data from the American petroleum Institute in a significant inventory reduction of 5.14 million barrels (expected decrease of only 1.1 million).

“Background on oil as a whole is balanced: stocks and production in the United States are falling, but OPEC no longer even want to discuss production cuts, fighting for market share. So the oil goes where it is the dollar,” – says financial analyst FxPro Alexander Kuptsikevich. And the dollar falls against commodity currencies, including against the ruble. The factor of expectations of the fed rate hike in mid-June has faded into the background.

“The markets do not see the threat in the imminent rate hike, not in a hurry to lay them in quotes in the money markets. It is not excluded that the fed will not be to go directly against markets and would not increase in June, taking six weeks to “work” with market expectations,” – says Kuptsikevich. The fed typically does not change its policy, if markets are not likely to lay, this step is below 60%. The last rate increase in December 2015 was also one of the most anticipated.

It would seem that the ruble was as a result of such rise in price of oil much stronger. However, the Russian currency grows quite moderately. According to 15.15 GMT the dollar traded at 65,13 ruble and Euro – ruble 72,77.

“The Euro/ruble rewrote the lows from December, but dropped down to 40 cents from yesterday’s close. The dollar/ruble still can not go below 65, although the oil comes much more strongly”, – says Alexander kuptsikevich. With oil at $ 50, the ruble would cost 64-64,5 for a dollar, also surprised the analyst Denis Davydov from Nordea Bank. The ruble is quite detached market reacts to the positive, probably due to expectations of easing of the Central Bank and weakness in consumer demand, says Kuptsikevich.

The holiday season

There comes the holiday season, and for many who intend to vacation abroad important predictable exchange rate. Whether to buy dollars or euros right now?

Alexander kuptsikevich waiting for after summer reversal of the ruble, that is a new low. “It is even possible that today we are seeing peak levels of prices for oil up until the fourth quarter,” he says. On the other hand, already hardly wait for the sharp collapse of the ruble and the wild jumps of the course.

“65 per dollar, and for 70 euros I think are a good time to buy a currency. In the first case, the goal has been reached and the second not yet. The potential decline of the Euro remains due to the softness of the ECB and the much more sluggish growth than in the United States,” – says Kuptsikevich. In other words, the best time to purchase vacation dollar than it is now, may not be.

That may also prevent the ruble to continue to grow? Risks for the ruble are the reduction in the rate of the Central Bank of the Russian Federation, the resumption of foreign currency purchases by the Bank of Russia, the fed rate hike and a correction in oil. The probability that at least one of these factors will work this summer.

“With caution look at the prospects of the ruble since June 10. Our Central Bank at the end of April was warned about readiness to reduce the rate, if you allow inflation and wage growth. Strictly speaking, they do not allow – the prices are not falling, wages are not going up, but the lower volatility of the ruble and favorable dynamics obviously make the picture less gloomy than previously. In addition, the Bank of Russia may return to purchase foreign currency to replenish the reserves, because foreign exchange market is calm,” – says Kuptsikevich.

In particular, inflation for the week was 0.1% YTD to 2.8%, in annual terms remained at 7.3%. In such conditions, the Central Bank may soften its credit policy.

As for the fed, the U.S. regulator corrects all the forces of the market expectations in the direction of a willingness to normalize policy. The next meeting will be held on June 15. But even without the rate hike, the dollar is able to impressive growth momentum, says Kuptsikevich. And this will cause the ruble to fall again.

Finally, a correction on oil, which will also result in the fall of the ruble. The news background around the oil market remains positive for growth. “Nigeria and Canada have reduced supplies on world market in total amount of almost 1.5 million barrels per day, production in the United States is falling, while in the country kicked off the holiday season, accompanied by a growth in demand for diesel fuel. USA knocks consume about 22 million barrels. The increase in demand even by 5-10% will lead to consumption growth at 1-2 million barrels per day,” says Valery Polkhovsky from Forex Club.

However, all of these factors are short term in nature. “Canada can last several months to bring its production capacity in order. Towards the middle of summer demand in the U.S. will begin to decline. Accordingly, the reason for a massive strengthening of the prices yet,” he warns.

Finally, even if Brent will be able to pass for 55 dollars for barrel, there will be a new factor of pressure is at play shale companies, who will get the chance to return to the market. “Being aware of this moment, the major parties are unlikely to show high demand at more than 55 dollars per barrel. For growth above this level required more fundamental changes in the state of supply and demand than those that dominate the market now,” concludes Polkhovsky.

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