Words of support: why did the ruble go up after statements by the head of the US Federal Reserve?
On Thursday, July 11, the dollar fell below 63 rubles, the euro - below 71 rubles. The Russian currency is strengthening after the speech of US Federal Reserve Head Jerome Powell. Against the background of growing risks in the economy of the United States, the Fed may reduce the interest rate at the next meeting. For this reason, investors sell off the US currency and invest in assets of developing countries. According to experts, support for the ruble is also provided by a record-for-a-half month increase in oil prices due to the threat of hurricanes in the Gulf of Mexico and aggravation in the Middle East.
On Thursday, July 11, the Russian currency confidently rises in price during trading on the Moscow Stock Exchange. The dollar fell by 0.41% and for the first time since July 2 it dropped below 63 rubles. The euro lost 0.22% and reached a minimum level in the last three weeks - 70.9 rubles.
The official exchange rate of the Central Bank on July 12 was 62.99 rubles per dollar and 71 rubles per euro.
A noticeable strengthening of the national currency started the night before. According to experts interviewed by RT, the markets reacted to statements by US Federal Reserve Head Jerome Powell. On July 10, during a speech in the US Congress, the chairman of the American Central Bank reported risks to the country's economy. The words of the head of the Federal Reserve have strengthened investors' expectations of a quick interest rate reduction and provoked a global weakening of the dollar.
“Uncertainty about (economic. - RT ) prospects has intensified in recent months. In particular, it seems that economic development has slowed in some large foreign economies, and this weakness can affect the US, ”Powell stated.
As expected, as a result of the emerging problems, Fedzrezerv may cut the interest rate by 0.25 percentage points at the next meeting in July. According to the main analyst at BCS Premier, Anton Pokatovich, the likelihood of such an outcome is estimated at 100%. The actions of the regulator in theory should support economic activity in the United States, but will make investments in dollar assets less profitable. Against this background, market participants are beginning to actively invest in the securities and currencies of developing countries, including Russia.
As the chief strategist of UNIVER Capital, Dmitry Alexandrov, told RT, the ruble is also supported by high demand for Russian federal loan bonds (OFZ). According to the latest data from the Central Bank, in May, the share of foreign investment in Russia's debt securities increased to 30% and updated the annual maximum.
At the same time, analysts believe that one of the main reasons for the strengthening of the ruble is a record increase in oil prices over the past six weeks. In the course of trading on the London Stock Exchange, the raw materials of the Brent benchmark rose by 0.7% to $ 67.5 per barrel. The last time a similar value could be observed even on May 30.
It is noteworthy that in less than a day prices increased by almost $ 3. Global appreciation of hydrocarbons occurred after the publication of US statistics. Thus, according to the report of the US Energy Information Administration (EIA), over the week, oil reserves in the United States declined more than forecasts and immediately fell by 9.5 million barrels to 459 million. Previously, analysts had expected a decline of 3.08 million.
At the same time, the deterioration of the weather in the Gulf of Mexico played in favor of the growth of commodity prices. According to the Bureau of Environmental Safety of the United States (BSEE), amid the threat of a hurricane in the region, 31.9% of oil and 17.8% of gas capacities stopped working.
“The attention of the markets is now attracted by another tropical storm in the Gulf of Mexico, which is likely to turn into a storm and a hurricane. With the onset of the hurricane season, risks to American oil production have traditionally increased. At the moment, due to weather conditions in the United States, about 600 thousand barrels per day of production has been stopped, which also acts in favor of price increases, ”said Anton Pokatovich.
In addition, experts also attribute the rising costs of energy to raw materials in the Middle East. So, on July 10, information appeared in the media about an attempt by Iranian boats to stop a British tanker in the Strait of Hormuz. According to analysts, Tehran’s actions were a response to the detention of an Iranian oil ship by Britain in early July. At the same time, Tehran stressed that their patrols did not interact with any foreign courts.
“In the area of the Persian Gulf, an oil conflict is intensifying. Previously, the United States imposed restrictions on Iranian oil exports, in response, the authorities of the Islamic Republic threatened to block the Strait of Hormuz, and began to develop their nuclear program outside of the nuclear deal. Now, however, a new aggravation has occurred, and the likelihood of an armed conflict in the region has begun, ”said Dmitry Alexandrov.
According to analysts, the possible start of hostilities in the region risks turning into disruptions in the supply of raw materials throughout the Persian Gulf and raises concerns among investors.
However, as expected, in the near future, the main factor affecting the price of oil will be the execution of the OPEC + transaction. In late June, the countries participating in the agreement to freeze the extraction of raw materials decided to extend the contract until the end of 2019 to balance the global energy market. Against this background, according to Anton Pokatovich, in the coming months, quotes may exceed $ 70 per barrel and will trade in the range of $ 70-75.
The projected rise in oil prices will continue to have a positive impact on the ruble dynamics. However, investor sentiment will depend on the further development of the situation in the Middle East, as well as on trade negotiations between China and the United States. About this in a conversation with RT told the general director of "Oriole Capital" Andrei Hohrin. The possibility of ending the tariff war and concluding a deal between Beijing and Washington will further enhance the interest of world investors in risky assets of developing countries.
In general, as the expert believes, in the near future the national currency rate will remain in the range of 62-65 rubles per US dollar and 70-73 rubles per euro.