The dollar is losing ground in the global market
The dollar is losing ground in the global market, and that’s good news for the ruble. The U.S. currency returned to 64.50 rubles, losing 16 cents since the beginning of the day. At the same time, the Euro grows in pairs with other currencies, against the thrust recovery in risky assets. So, EURRUB adds 7 cents to 72.79, and at the start of trading, the pair climbed to 73.
The growth of ruble and Euro in the first place, there are impressive data from China. The positive balance of trading balance of China in March amounted to $32.6 billion, vs expected $7.7 billion Is great news for Russia, for which China is an important market for raw materials and for Germany (i.e. euros), for which China is the largest trading partner.
Demand for riskier assets also helped the oil to stabilize near $71 per barrel for Brent, and not to give in to sentiment for correction.
However, investors should not overlook the development pressure on the Turkish Lira and the Argentine peso. These currencies were the cause of large-scale wave of sales in the markets of developing countries in the second half of last year. Now they are again losing ground due to internal problems. While positive news from China could tip the scales in the market towards purchases of risky assets, however, completely ignore the dynamics of the currency and of government bonds of Turkey and Argentina would be reckless.
In addition, there remain risks specific to Russia in the form of possible sanctions. Investors rush to purchase government bonds, and the Ministry of Finance to release them until the sanctions (the most restrictive scenarios) will not restrict Americans from such purchases. It is also an important driver of the ruble in recent weeks.
Another factor for the Russian currency began changing expectations about policy, the Bank of Russia. Concern Yudayeva high growth rate of consumer credit was a signal that mega-regulator may not rush to ease policy. Meanwhile, inflation continues to impress with its low levels, which undoubtedly increases the pressure on the Central Bank from politicians and business, which require lower rates.
_______________ Alexander Kuptsikevich,