Over the month, the ruble has strengthened against the dollar by 22% and is approaching our target>₽70/$ (November 2021). The Russian currency is the only one in the world that strengthened against the dollar in a month. The dollar, in turn, continues to rise and has risen in price by another 5% over the month, to the level of 2002 (a 20-year high) against the backdrop of rising US Treasury yields (carry trade) ahead of a new rate hike cycle in early May.
The ruble is rising in price due to a significant inflow of export earnings, which is converted into Russian currency, record tax payments and the beginning of the rubleization of Russian gas exports, in addition to a reduction in imports and an organic decrease in demand for currency from companies and individuals. We think the current level of the ruble is attractive for buying foreign currency.
The inflow of export earnings is the main factor in the strengthening of the ruble, in the past two months it has been at least $1.7 billion a day. The volume of Russian oil exports remains significant. Over the past month, average deliveries were 7.2 million b/d, just 0.4 million b/d below the average of 7.58 million b/d in February, before the start of the special operation. Russian oil exports are on average 156,000 b/d higher than before the start of the special operation, while oil product exports are down 652,000 b/d, according to data on oil shipments from export terminals to ocean tankers. In accordance with previous commitments, nine European countries, as well as the US, UK and Canada continue to diversify Russian oil exports. At the same time, after February 24, China, India and Turkey increased their purchases of Russian oil by 890,000 b/d, with India increasing volumes by 700,000 b/d and China by 90,000 b/d.
Germany on April 28 supported the imposition of an embargo on oil imports from Russia, and measures are now being discussed that should be introduced so that the reduction in supplies does not contribute so much to rising prices for raw materials.
With the current favorable dynamics, the ruble could easily drop from ₽70/$ to ₽65/$ and below, but the state is not interested in further strengthening of the national currency due to the export orientation and the growing need to fill the budget, the share of oil and gas revenues in the structure of which will only grow. At the same time, a strong ruble is of little relevance now and will have little effect on purchasing power and inflation due to falling imports and a reduction in the supply of goods on the market, many of which cannot be replaced. The relevance of the currency is reduced due to restrictions on the movement of capital, as well as other restrictions, in particular on travel abroad, which are collectively reflected in low demand for the currency.
We believe that the regulator will try to keep the exchange rate in the range of ₽75-85/$ by easing capital restrictions. The latest easing in terms of export earnings slightly affected the ruble (mandatory sale of foreign exchange earnings from 3 to 60 days), on the contrary, accelerating its strengthening. Perhaps at the next stage, the authorities will increase the limit on the withdrawal and transfer of currency by individuals, which now stands at $10,000 per month. The foreign exchange market is limited in liquidity as it is dominated by exporters who sell the currency.
The dollar as the main currency of the carry trade
Source: Bloomberg, ITI Capital