Currency thaw: the euro for the first time since the beginning of March fell below 79 rubles

On Friday, May 15, the Russian currency was able to significantly strengthen on the Moscow Exchange. So, in the middle of trading, the euro fell by 0.4% to 78.98 rubles. The rate was the lowest since March 6th. At the same time, the dollar depreciated by 0.6%, to 73 rubles. In the afternoon, the indicators recovered somewhat - to 79.7 rubles per euro and 73.5 rubles per dollar.

The official exchange rate of the Central Bank on May 16 is set at 73.21 rubles per dollar and 79.13 rubles per euro. 

According to RT analysts surveyed, the maximum increase in oil prices over the past month has had a positive impact on the Russian currency. During Friday's trading, the cost of Brent benchmark grade raw materials on the ICE exchange in London grew by 3.3% to $ 32.5 per barrel.

“Improved investor sentiment in the commodity market was facilitated by updated forecasts of the International Energy Agency (IEA). Analysts improved their forecast for oil demand amid weakening quarantine measures. By the end of May, 2.8 billion people in the world will live in a restriction regime compared to 4 billion in April. This study gave the market a signal that global energy consumption has headed for growth. As a result, quotes went up, ”Anna Bodrova, senior analyst at Alpari Information and Analytical Center, told RT.

According to the new IEA report, by the end of 2020, global energy consumption in the world will decrease by 8.6 million barrels per day. Previously, experts expected a decrease of 9.3 million. The revision of the forecast was influenced by the actions of the authorities of some countries to weaken the regime of self-isolation and to remove restrictions on movement.

Moreover, the performance by OPEC + members of the new agreement on reducing oil production has a positive effect on quotes. This was in an interview with RT, the head of the analytical department of AMarkets Artyom Deev.

Recall, from May 1, to combat the global overabundance of oil, the countries participating in the OPEC + transaction, including Russia, began to reduce the production of raw materials by 9.7 million barrels per day. A decrease in production also began in several other countries - exporters of raw materials, including the USA, Norway, Argentina and Canada. According to the Russian Ministry of Energy, the total reduction in oil production by global hydrocarbon producers may reach 15-20 million barrels per day.

“Moreover, the other day, Saudi Arabia announced its intention to further reduce production by another 1 million barrels per day. This fact also spurred the growth of quotes. Investors also positively assess the decline in oil production in countries that are not members of OPEC +, in particular in the USA and Canada. Positive in the commodity market may become one of the key drivers for the rapid strengthening of the Russian currency, ”said Artem Deev. 

Financial momentum

In addition to news from commodity markets, the Russian currency is supported by the actions of the Bank of Russia. Recall, to stabilize the ruble since March 10, the Central Bank began proactive sale of foreign currency on the domestic market. Thus, the regulator artificially increases the demand for rubles. In total, over two months the volume of foreign currency sales amounted to 592.3 billion rubles.

An influx of investments in Russian debt securities also plays in favor of the ruble. At Friday's auction, the country's government bond index (RGBI) grew by 0.8% and for the first time since the observation (since 2002) reached 156.1 points.

According to RT expert at the BCS Broker stock market Dmitry Babin, investors are attracted by reliable financial guarantees of Russia and the opportunity to get higher profits than in the US and Europe. At the same time, a decrease in the key rate by the Central Bank over time will make investments in federal loan bonds (OFZ) less profitable, therefore market players are trying to pre-purchase securities at a bargain price.

“In April, the Central Bank lowered the rate to 5.5% per annum. Despite this, the return on investment in OFZs for foreign investors remains higher than in other countries. Because of this, the RGBI has been updating historical highs for several days in a row. Such dynamics provides significant support to the national currency, as foreign traders exchange foreign currency for the ruble to purchase government bonds, ”the expert explains. 

Moreover, according to Artyom Deyev, the ruble is strengthened by government measures to support the economy in the context of the coronavirus, as well as the beginning of the tax period.

“New measures to support citizens, as well as small and medium-sized businesses, will help prevent deflation and reduce the potential drop in Russia's GDP this year. Moreover, in the near future, the ruble will begin to receive support due to the onset of the tax period. Russian exporters will begin to transfer part of the resulting foreign exchange earnings into rubles in order to make tax payments to the budget. This will create additional demand for rubles, ”the expert explains. 

In general, analysts do not exclude the possibility of new fluctuations in the Russian currency market in the near future, but at the same time they count on the gradual strengthening of the national currency over the next few months. Thus, according to Dmitry Babin, in the event of favorable conditions on external commodity markets and further weakening of quarantine measures in the world, the dollar exchange rate in the medium term will be traded in the range of 73–74 rubles, and the euro exchange rate near 79–80 rubles. At the same time, Artyom Deev does not rule out a decline in indicators to 72 and 78 rubles, respectively.