Dollar for 65 rubles becomes the new reality for Russia

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On Wednesday, August 8, the dollar and the Euro soared against the ruble. At the moment the dollar on Masuria give 64,874 RUB, which is 2.23% more than yesterday’s close. The Euro rose against the ruble even more than the dollar, rising to yesterday’s close was 2.3% and now because they are already 75,167 Thus RUB, EUR/RUB has broken through the corridor in 73-74. and went up above 75 rubles. per Euro. Meanwhile, the Bank of Russia announced for tomorrow, August 9, the official exchange rates in RUB 63,595 to the dollar and 73,8211 RUB for Euro.
The ruble weakening against the background of today’s publication in the Russian media, revealing details submitted to the Congress of the anti-bill, in which Russia is offered to be one of the sponsors of terrorism and to ban Russian state-owned banks payments in U.S. dollars. It is important to note that in the US this document was never published. It is unlikely that such a bill is passed, but nervous of the currency and debt markets has responded to the falling rate and rising yields.
On Wednesday, the Finance Ministry was able to place OFZ-PD issue No. 26223 only 11,023 billion of the 15 billion rubles, the Weighted average yield of 7.98% per annum. Morning bidding of 94.40/50 points and after the auction, the collapse continued to 93,76/80 points. It can be assumed that the results of the second auction for OFZ-PK 29012 would also be disappointing.
The ongoing fall in the ruble against the dollar can be called speculative, because of the objective economic preconditions for the collapse of the Russian currency there. Low rate of the ruble is favorable for Russian exporters, particularly the oil and gas industry sector, agricultural sector, several types of engineering. So, Russia’s budget will demonstrate steady growth of the surplus, but the weakening of the Russian currency will bring inflation to the target forecast by the government and the Central Bank of the Russian Federation to 2018 at 4%.
The severity of the weakening of the ruble again will feel greatly impoverished during the crisis of the middle class in Russia, which, like the business sectors operating in the domestic market, interested in a strong ruble.
A new stage of drawdown of the ruble could increase tensions in relations with Russia’s key partners in the EEU, in particular, with Belarus and Kazakhstan. The governments of these countries believe that the drawdown of their national currencies tied unfounded and weakening them to the problems of the Russian ruble. Then the governments of the EEU partners will need to adopt new monetary policy and a policy of mutual calculations, it is possible that in the future the EEU will have its own supranational currency, replacing the dollar. We believe that nothing prevents the creation of a supranational currency in the EEU, it can even be a cryptocurrency.
Let me remind you that since the beginning of January to today’s collapse of the ruble, the dollar against the ruble rose by 11.5%, the Euro against the ruble rose by 7.3%.
If the U.S. Congress will still be accepted, or at least start to discuss the “sanctions” bill, then the ruble may fall substantially. In this case, if sanctions will be imposed against Russian public debt and restricted payments in dollars the state banks, the dollar could in the short term to reach even 70 rubles. However, we doubt that such a law may be adopted, as it will only worsen relations between Russia and the United States. And in the US in November elections to the Senate, and there is a significant proportion of voters, conversely, would prefer improved relations with Russia.
In London trading Brent crude oil falls 0.6%, at the moment bbl is trading slightly more than $74. The decline in oil prices is likely further contributes to the weakening of the ruble. We believe that in the coming days, a barrel of Brent will be evaluated by the market at us $74.3-75,5.
According to our forecast, USD/RUB is now coming to levels in 64-65, and the pair EUR/RUB – to a new range 74-75,5. However, we believe that the sanctions emotions will soon subside, as in fact this information is not news, and the adoption by Congress of the anti-Russian law is open to question.
Natalia Milchakova,
The Deputy Director of analytical Department,