(Finance and Economics) Bottomed out and rebounded by nearly 200%. Why can the Russian ruble achieve a "shattering reversal"?
China News Agency, Beijing, June 6th (Reporter Xia Bin) It took just over two months for the Russian ruble to go from the world's worst-performing currency in March to the world's best-performing currency recently.
How was such a "shattering reversal" accomplished?
Since the Russian-Ukrainian conflict, the Russian ruble has been on a "V"-shaped roller coaster.
In the face of multiple rounds of economic sanctions by Western countries, the ruble first fell, and on March 7, it fell to the lowest point of the year. 1 ruble can only be exchanged for 0.0064 US dollars, less than 1 cent, which is 50% lower than before the conflict broke out. about.
But the Russian ruble then began to "recover lost ground", all the way higher.
By May 24, at the highest point of the day, 1 ruble could be converted into US$0.018, a rebound of nearly 200%, and an increase of more than 35% compared with the beginning of the year. After entering June, the exchange rate was basically stable at around US$0.016.
The US Bloomberg commented: "The ruble is the best performing currency in the world this year."
What drove the ruble to bottom out?
Pang Ming, chief economist and chief strategist of Huaxing Securities (Hong Kong), told a reporter from China News Agency that from a subjective point of view, Russia's trade settlement and debt repayment, capital controls, and establishment of a completely self-controllable payment system, etc. A series of combined punches offset the short-term depreciation pressure on the ruble.
Pang Ming explained that, first of all, Russia requires "unfriendly" countries and regions that conduct natural gas trade with Russia to open a ruble account in a Russian bank and settle natural gas trade with this, otherwise Russia will regard it as a breach of contract.
"This ruble settlement order currently has more than 20 European companies having to use the ruble to buy Russian gas, which supports the ruble exchange rate on the demand side, which is expected to gain on the demand side considering the increasing demand for gas reserves for this winter. More support." Pang Ming said that Russia also allows companies and individuals to repay the debts of "unfriendly" countries and regions in rubles, which not only maintains international credit, but also partially offsets the pressure of ruble depreciation.
Secondly, the Central Bank of Russia raised interest rates sharply in an emergency to smooth out market volatility, increase the willingness to save the ruble, and reduce the incentives for savers to run, sell the ruble to buy foreign currency and other behaviors in disguise.
Once again, Russia has adopted a package of temporary capital such as restricting residents from withdrawing excess foreign currency from foreign currency bank accounts or remittances to foreign bank accounts, restricting foreign customers from withdrawing certain foreign currencies or selling ruble assets, and requiring oil and gas exporters to sell 80% of their foreign exchange earnings and purchase rubles. Control measures to stabilize the ruble exchange rate.
He also mentioned that Russia's national payment system and Mir payment card, to a certain extent, avoided the inconvenience caused by the withdrawal of international payment giants from Russia and the exclusion of Russia from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network, and ensured that domestic banks in Russia were Transactions are running normally.
From an objective point of view, Pang Ming said that the strong international demand for Russian oil and gas, agricultural products, raw materials and other commodities has brought Russia a trade surplus, as well as the international market's continuous revision of expectations for energy prices, which supports the ruble exchange rate. The "V-shaped" trend of rebounding and skyrocketing has weakened the effect of Western sanctions on Russia.
What is the future of the ruble?
Peng Wensheng, chief economist of CICC, believes that the fundamental reason for the appreciation of the ruble against the market trend is Russia's status as an important energy producer and exporter in the context of the rising importance of real assets.
The recent experience of Russia shows that in the context of de-globalization and de-financialization, the importance of real assets has increased, and the supporting role of commodities for a country's currency will increase.
There are also analysts who believe that the performance of the ruble in the first half of the year is due to the strategic support of Russia's energy weapons, and in the second half of the year, as the international demand for food rises, the ruble will have a new "backing".
"The strong trend of the ruble exchange rate in the short term shows that Russia's finance and economy are still relatively stable as a whole. However, it must be seen that the ruble exchange rate is still uncertain in the medium and long term." Pang Ming said.
For example, he said that the above-mentioned uncertainties are related to the intensity, scale and negotiation results of the conflict between Russia and Ukraine, and are related to the implementation and transformation speed of the European Union and other Western countries’ plans to adjust their energy structure and get rid of their dependence on Russia’s energy. The operation of western countries and even the global financial market is related to the prospect of economic recovery.
In addition to the US dollar and gold, the ruble urgently needs to find a stable and practical value anchor and measurement standard in the medium and long term. Linking to a basket of currencies or oil and gas rubles are possible options in the future.
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