On Thursday, June 20, the Russian currency strengthened record-high during trading on the Moscow Stock Exchange. Thus, the dollar fell by 0.8% and for the first time since August 2018 reached 63.2 rubles. At the same time, the euro exchange rate also slightly decreased - by 0.15%, to 71.4 rubles.
The official exchange rate of the Central Bank on June 21 was 63.39 rubles per dollar and 71.54 rubles per euro.
Simultaneously with the appreciation of the ruble, steady growth in quotations can be observed on the Russian stock market. Mosbirzhi index added about 0.8% and for the first time in history exceeded 2780 points.
Experts interviewed by RT associated a positive on the Russian financial market with statements by the US Federal Reserve. On June 19, top managers of the American Central Bank, following the meeting, kept the interest rate at 2.25—2.5% per annum, but hinted at its decline in the near future. The rhetoric of the regulator revived investor sentiment in all emerging markets.
From the official press release of the Fed it follows that the growth of economic activity in the USA is predicted, but at the same time it notes increased uncertainties. Thus, as expected, the Fed intends to closely monitor the situation and is ready to take incentive measures to support the economy.
Against this background, according to the data of the Chicago Commodity Exchange CME Group, investors with a probability of 68.8% expect a rate cut in July to 2-2.25% per annum. At the same time, 31.2% of players predict an even greater decrease - to 1.75—2% per annum. According to experts, no one believes in saving rates at the next Fed meeting.
The last time the American central bank reduced the interest rate in December 2008. Such a measure was taken to stimulate economic growth during a recession: loans became cheaper, and the level of consumption and investment began to grow. However, according to analysts, the Fed has traditionally caused a global weakening of the dollar.
“Lowering the rate of the Fed leads to the fact that yields on bonds and bank deposits in the United States will decrease. As a result, investors in search of more profitable instruments will invest in other markets, primarily developing countries. To do this, players will need to sell dollars and buy the currency of these countries. This, in turn, causes the weakening of the national currency of the United States, ”Denis Ikonnikov, the portfolio manager of the QBF IC, explained in an interview with RT.
Moreover, as explained by RT chief analyst at BCS Premier Anton Pokatovich, today the Russian currency is supported by the continuation of the tax period (companies buy record amounts of rubles to pay taxes), as well as the restoration of oil prices. On June 20, in the course of trading on the ICE exchange in London, the cost of raw materials of the Brent benchmark rose immediately by 2.7% to $ 63.5 per barrel.
The expert also believes that the markets positively evaluated the statements by Donald Trump about the US desire to improve relations with Russia and China. In particular, the head of the White House on the air of Fox News TV channel confirmed its intention to hold meetings with Russian leader Vladimir Putin and Chinese President Xi Jinping on the margins of the G20 summit June 28-29.
In the coming months, Anton Pokatovich predicts the exchange rate range of 62.9-65 rubles.
RT analysts polled do not rule out continuing to strengthen the Russian currency in the short term. So, according to the head of the operations department on the Russian stock market of Freedom Finance Georgy Vaschenko, until the end of June and in the beginning of July, the dollar rate will remain in the range of 63–64.5 rubles, but it may briefly fall below the level of 63 rubles.
“The ruble is the strongest and most popular currency of developing countries since the beginning of the year. The profitability of the carry-trade operations exceeds 11%, and against the background of a weaker dollar, it will grow even more. Investors will not sell ruble securities as long as the dollar rate remains below 66.5 rubles, ”explained George Vashchenko.
The financial strategy of carry-trade involves the acquisition of the currency of the state in which low interest rates are established, with the subsequent investment of this money in the currency of countries with high interest rates.
Georgy Vaschenko believes that until the end of August the dollar will remain near the level of 63-66.5 rubles.