Zero pressure: why the dollar for the first time since December 2018 dropped below 66 rubles

On Thursday, January 24, the opening of trading on the Moscow Stock Exchange was marked by a record strengthening of the Russian currency over the past month and a half. Thus, the dollar fell by 0.2% and for the first time since December 7, 2018 reached the level of 65.9 rubles. The euro exchange rate at the same time fell by 0.3% - to 74.9 rubles. The last time a similar value could be observed on December 14th.

The official exchange rate of the Central Bank on January 25 was 66 rubles per dollar and 75.03 rubles per euro.

According to analysts polled by RT, support for the national currency is provided by continued tax payments, as well as the recently increased investor interest in investing in risky assets. Thus, according to Ivan Manayenko, Head of Analytical Department of Veles Capital Investment Company, market players are more and more actively buying shares and debt securities of developing countries.

In many ways, this trend is caused by the softening of the rhetoric of world central banks, in particular, the US Federal Reserve. This was said in a conversation with RT by the deputy chairman of the board of LOCKO-Bank Andrey Lyushin. As previously stated by the head of the American regulator Jerome Powell, in 2019 the Fed - after last year’s four-time rate increase - intends to act more cautiously.

The players of the world stock market positively perceived Powell's statements, and amid the expected pause in the increase in interest rates, they increased the inflow of investments in risky assets. As Lyushin notes, a similar softening of the rhetoric may be followed by the European Central Bank (ECB) during the January 24 meeting. In other words, simultaneously with the increasing interest of world investors to the assets of developing countries, since the beginning of January there has been an influx of foreign capital into the Russian market. This, in turn, according to experts, has a positive effect on the dynamics of the ruble exchange rate.

Since the beginning of 2019, the ruble has strengthened against the US currency by almost 7%, and against the European currency - by 6%. It should be noted that in the first days of January the dollar reached the level of 71 rubles, and the euro - 80 rubles. According to Ivan Manaenko, one of the reasons for the appreciation of the national currency observed today was the lack of sanctions rhetoric from the United States. In many ways, as the analyst explained, this is caused by the continuing shatdown in the States - the suspension of the work of the American government.

Recall, December 22, part of the federal agencies of the United States temporarily stopped work. The reason was the disagreement between the representatives of the Democratic and Republican parties in the discussion of the budget - the parties could not agree on the financing of the construction of the wall on the border with Mexico. As a result, the Shatdaun became the longest in the history of the state.

“Some powerful local factors of pressure on the ruble are not visible now. We only note that a more serious strengthening of the national currency is hindered by the operations of the Bank of Russia to purchase currency in the interests of the Ministry of Finance, ”said Vasily Karpunin, head of the analytical department of BCS Broker, in an interview with RT.

On January 15, the Bank of Russia, after a long pause, resumed purchases of foreign currency for the Ministry of Finance on the open market. As expected, until February 6, the regulator will send 265.8 billion rubles for this purpose. Thus, the daily volume of operations is 15.6 billion rubles.

Recall that the Ministry of Finance conducts currency interventions through the Central Bank within the framework of the budget rule. Such a ministry strategy is designed to reduce the ruble’s dependence on oil prices and is an insurance for the Russian economy from hydrocarbon market shocks.

While the energy of the Urals brand is trading above the set threshold of $ 41.6 per barrel, the agency buys foreign currency for the super profits received from its sale. As a result, with the rise in oil prices, the national currency of Russia does not strengthen, and in the event of a sharp collapse in commodity prices, the volume of operations of the Central Bank and the Ministry of Finance decreases and the pressure on the ruble weakens.

“Currency purchases by the Central Bank are limited for the national currency. At the same time, it is highly likely that with further strengthening of the ruble, the regulator may begin to take additional volumes of currency from the market, compensating for the lack of purchases under the budget rule in the second half of last year, ”added Andrey Lyushin.

According to Ivan Manaenko, in the absence of external shocks, the ruble may rise in price a little more. At the same time, according to the expert, the preservation of sanctions risks compels investors to act cautiously and continues to impede a more significant strengthening of the ruble. Thus, as the analyst believes, in the near future the dollar rate will remain near 66.3-66.5 rubles per dollar.

At the same time, according to Vasily Karpunin, in the medium term, the dollar rate will continue to fluctuate in the range of 65–68.5 rubles.