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Thursday, October 27, 2016

When Russia will wait for a strong ruble

A year and a half ago, the Russian currency has died. That is collapsed to the level of the floor. If in 2 Dec 2014 the dollar was worth slightly more than 51 of the ruble, then just two weeks later — almost 68 rubles. The exchange has prepared a three-digit plates, being sure that the price of “green”, not to mention the Euro, will soon jump over this mark. They were close to the truth. In the night from 16 to 17 December, the foreign exchange market was in a panic — the Euro gave more than 100 rubles, and the dollar — more than 90 rubles. It seemed that the Russian “Titanic” as “wood” is rapidly sinking to the bottom.

photo: Alex geldings

A lifeline thrown by the Bank of Russia raised its key interest rate from 10.5% to 17%. However, he permanently froze the credit market. However, the situation is relatively normal. In January 2015, the dollar, the Central Bank sets 70 roubles, while ordinary consumers were willing to pay much more.

Since then, the Central Bank gradually reduced the key rate, returning this summer its value to 10.5%. The credit market was reopened. And the national currency was fixed in the corridor up to 65 “wooden” and “green”. However, not once. In January of this year, the dollar was paid to 83 rubles.

For all of these races is responsible, of course, oil. More precisely, the fall in energy prices. And as the Russian economy, despite all the efforts and promises of the government continues strongly depend on the quotations of “black gold”, the ruble continues to drop in certain directions. But rather down than up.

Now the dollar is worth about 64 rubles. Which, of course, judging by recent fluctuations, not bad. In late July, green pulled at 67 rubles and even more.

However, according to Russian officials, the last time the ruble has demonstrated minimal dependence on oil prices. This view was even supported by Western analysts. According to Bloomberg, this dependency fell to the lowest level since July last year. But is it really or there is a political background, it is not clear. Nevertheless, the ruble has ceased to grow after Vladimir Putin at the end of July drew the attention of Dmitry Medvedev to the risks of excessive strengthening of the ruble and asked the government to take appropriate action.

The fact that the Russian industry is the most profitable low exchange rate. Both domestic and foreign markets. The cheaper the goods are, ceteris paribus, so it is more expensive to sell and cheaper to buy.

As a result, over the past year “green” from July 2015 to July 2016 has grown by about 15% — from 56 to 64 rubles.

But in spite of the obvious the price of oil increases. According to financial analyst FxPro Alexander kuptsikevich companies, it supports the uncertainty in the imminent policy tightening in the U.S. and speculation about the willingness of major manufacturers to discuss again the limitation of production, which in previous times had ended in failure.

According to the Minister of energy of Russia Alexander Novak, the country is ready to continue the dialogue with the countries of OPEC to stabilize oil prices. He reported on the negotiations on the limitation of oil production in the shortest possible time. “Speculators have noticed that producers can negotiate,” — said Alexander Novak. Russia is also ready to go on joint measures to stabilize the price situation, provided that these measures will be temporary.

So who wins: the oil or the ruble? Repeat the situation that we saw in December 2014, and the “wood” will eventually sink down below the three-digit level for the dollar. Or it will come up, at least staying at current levels?

However, to speculate on the exchange rate is guessing on a coffee thick. Repeatedly warned by many Russian economists.

However the ruble exchange rate depends not only on oil prices. The importance of the General state of the economy. But with this there is progress. Last year, our GDP fell by 3.7% in the first quarter of this year by 1.2% and in II quarter — up 0.6%. According to the Minister of economic development Alexei Ulyukayev, this year we will cease to fall, and in 2017 will start to grow gradually.

If this forecast is correct, the ruble will really stop falling. In this case, the Russian who is about to embark on a European resort or want to relax on the shore of the other warm countries, may not rush to buy foreign bills.

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