For the first time since April: why the dollar and euro rose above 72 and 77 rubles

On Thursday, December 22, the Russian currency shows mixed dynamics on the Moscow Exchange.

In the middle of the day, the dollar rose by 2.3% and for the first time since April 28 reached 72.63 rubles.

At the same time, the euro exchange rate grew by 2%, to 77.11 rubles, the highest level since April 27.

However, in the evening, the indicators began to noticeably decline and at some point dropped to 68.81 and 73.02 rubles, respectively.

Since the beginning of the week, the national currency has fallen in price against the US and European by more than 10%.

As Dmitry Babin, an expert on the BCS World of Investments stock market, told RT, the ruble was under pressure from a number of factors.

In particular, investors were alarmed by the situation in the energy market.

“First of all, we see a gradual reduction in export earnings due to lower prices for oil and other raw materials.

An additional negative is the increased effect of the previously imposed sanctions, as well as new anti-Russian measures, including those directed against exports, ”Babin explained.

Let's remind, since December, 5th the European Union has refused sea deliveries of the Russian oil.

At the same time, the EU, the G7 states and Australia banned their companies from insuring and transporting raw materials from the Russian Federation to third countries at a price higher than $60 per barrel.

From February 5, 2023, the relevant restrictions should also apply to petroleum products.

Now Russia is preparing countermeasures in response to the decision of the West.

Moreover, earlier in the Kremlin and the government, it was repeatedly emphasized that Moscow would not sell energy to those states that would join the price ceiling.

In this regard, Russian energy companies continue to reorient the supply of raw materials to the East.

Due to the loss of the European market, Moscow is now forced to provide significant discounts on its energy products to attract buyers from more remote regions of the world.

As a result, according to the Ministry of Finance of the Russian Federation, a barrel of Russian Urals oil is currently selling at about $57.49, although back in November it was trading at $66.47.

In turn, the cost of raw materials of the benchmark Brent brand now fluctuates around $83 per barrel.

Moreover, according to experts, it may take several more months for Russian oil sellers to completely replace European customers.

Against this background, in the near future, the extraction of raw materials in the Russian Federation and, as a result, the volume of export earnings may decrease somewhat, experts do not exclude.

As early as November 2022, Russia was producing an average of about 10.87 million barrels of oil per day, according to the analytical company Kpler.

However, according to the organization’s forecast, by the end of December, the figure may drop to 10.32 million, and by April 2023 reach 10 million barrels per day.

“The imposition of an embargo and a price ceiling on Russian oil coincided with a fall in global hydrocarbon prices due to a worsening outlook for the global economy.

An extended period of low prices, or an additional strong decline, could result in a sustained loss of income for exporters.

Escalating geopolitical tensions and tightening sanctions worsen the prospects for Russian exports and mean a faster contraction in the trade balance, putting pressure on the ruble,” Elvira Nabiullina, head of the Bank of Russia, said earlier.

• Chairman of the Bank of Russia Elvira Nabiullina.

  Archive photo

• © Bank of Russia

It should be noted that in Russia today there is a surplus in the current account of the balance of payments - more currency enters the country than is withdrawn abroad.

This dynamic is due to the fact that Russian exporters still receive a significant amount of revenue in dollars and euros, and importers are less interested in foreign banknotes, since the supply of foreign goods has not yet been able to fully recover after the spring collapse.

According to the Central Bank, from April to June 2022, the current account surplus amounted to $76.7 billion, against which the ruble managed to strengthen to a record high.

However, already from July to September, the figure dropped to $51.2 billion, and the national currency began to gradually weaken.

As Dmitry Babin explained, at the moment, imports continue to recover steadily, so a further decline in foreign exchange earnings from oil sales may lead to an even greater reduction in the current account surplus.

This, in turn, will be the reason for further weakening of the ruble.

"Point Buyer"

In addition, the actions of some major participants in the foreign exchange market can now play against the ruble.

Ruslan Mustaev, portfolio manager at Otkritie Management Company, shared this opinion with RT.

“There are fewer players in the currency trading, so the market is now very “thin”.

If a buyer or seller of a currency appears with great interest, then he can quite strongly shift the market in either direction.

It is possible that now we are seeing the actions of just such a point buyer who is buying up the currency for some reason unknown to the broad market,” Mustaev said.

The upcoming tax period can hold back the weakening of the ruble, Vladislav Antonov, a financial analyst at BitRiver, is sure.

At this time, exporting companies traditionally sell foreign exchange earnings and buy rubles to pay taxes.

The peak of such payments may occur on December 26, the RT interlocutor noted.

According to Dmitry Babin, in the current conditions, until the end of 2022, the dollar exchange rate will fluctuate in the range of 70–74 rubles, and the euro exchange rate in the corridor of 74.3–78.6 rubles.

In turn, according to Ruslan Mustaev's forecast, by the end of December the value of the dollar may be close to 74-75 rubles.

At the same time, the analyst does not rule out the possibility of some course correction to the level of 65 rubles.