11.08.2022
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Experts assessed the impact of easing foreign exchange restrictions on the ruble exchange rate

MOSCOW, May 23 – PRIME. On Monday, the ruble continued to grow steadily against the dollar and the euro, renewing the highs for several years against the European currency, however, in the last half hour of the day’s trading, the dynamics slowed down somewhat due to lower requirements for the sale of exporters’ foreign exchange earnings.

The ruble rose against the dollar and the euro at the close of trading on Monday

This week’s peak in tax payments in May and the continued imbalance between supply and demand for foreign currency were weakly offset by the government’s move to make exporters obligated to sell foreign exchange earnings at 50% instead of 80% previously.

The dollar exchange rate with settlements “tomorrow” at 19.00 Moscow time (to close) fell by 2.37 rubles, to 57.87 rubles, the euro – by 2.7 rubles, to 60.1 rubles.

During trading, the euro fell to 58.27 rubles – the lowest since June 2015.

The volume of trading in the US currency with “tomorrow” settlements amounted to 2.7 billion dollars, European – about 2.5 billion euros.

RUBLE CONTINUED THE RALLY

On the Russian currency market on Monday, the steady strengthening of the ruble against the dollar and the euro continued. The approaching peak of the tax period (May 25), which falls on the beginning of the week, has been added to the already existing factors for the growth of the ruble. By tradition, it increases the supply of currency, since it requires players to accumulate ruble liquidity, which becomes difficult in the face of a depreciated foreign exchange rate. In May, a transfer to the budget in the amount of about 2.6 trillion rubles is expected.

At the same time, the easing of currency restrictions went almost unnoticed – the ruble slightly reduced its growth rate at the end of the session. The decision of the government commission to reduce the requirement for the mandatory sale of exporters’ foreign exchange earnings from 80% to 50% was explained by the RF Ministry of Finance by the stabilization of the ruble exchange rate and the achievement of a sufficient level of foreign exchange liquidity in the market.

The oil market was trading at about $110 per barrel of Brent, which is a positive factor for the ruble. Support comes from expectations of growth in demand for hydrocarbon fuels in connection with the upcoming summer driving season in the US.

As a result, the dollar fell against the ruble for the day by 3.9%, the euro – by 4.3%. The ruble price of oil was about 6.35 thousand per barrel of Brent.

FORECASTS

Although the current situation with the trade balance may contribute to the continuation of the trend towards the strengthening of the ruble, there are many scenarios that could cause a rapid weakening of the national currency of the Russian Federation, says Maxim Biryukov from Alfa Capital Management Company.

“The successful launch of parallel imports could significantly increase demand for dollars and euros. The reduction in exports caused by the embargo from Western countries can also dramatically change the country’s trade balance. Both factors are likely to take effect closer to autumn,” he explains.

Meanwhile, the general context of the functioning of the domestic foreign exchange market is now important, and not the formation of a single concentrated buyer, says Evgeny Koshelev from Rosbank. Although the direct customer of purchases – the Ministry of Finance or the Bank of Russia – may change the factors in the formation of ruble liquidity, he adds.

“The root problem is the presence of formal (from the Bank of Russia and the government) and informal (from foreign financial institutions) restrictions on the movement of capital. Russia, by virtue of a positive current account balance, has historically acted as a creditor of the external sector, given that the demand for a foreign currency loan within the country was not so high. Since March, the external sector has not been interested or is not able to use Russia’s credit, which means that the domestic foreign exchange market has been overwhelmed with foreign exchange liquidity,” says Koshelev.

Under these conditions, whoever acts as a buyer of the currency – Russian banks or a single “customer” from the financial and economic bloc – the excess currency will not disappear anywhere, he believes. “It is not possible to cope with this “Trojan horse” for the financial system with politically acceptable (unacceptable ones are not even worth voicing – they contrast too much with the desired paradigm) until the moment the current account surplus decreases,” he sums up.

Source: 1prime

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