Western analysts have recognized the Russian ruble as the best world currency. The market really has a unique situation: it seems that the sanctions should bring down the course. In fact, exactly the opposite.
Went to growth
Since the beginning of the year, the ruble has strengthened against the dollar by 11 percent, according to Bloomberg. This is the maximum among three dozen major currencies. Next is the Brazilian real. In third place is the Mexican peso.
This is the result of the actions of the government and the Central Bank, the agency notes. Because of the sanctions had to cut to the quick. In particular, in order to protect the savings of the population, the key rate was raised to 20 percent.
This was forced by the blocking of half of the country’s gold and foreign exchange reserves (GFR) – almost $300 billion. The West dealt a serious blow to Russia’s financial system. He tied the hands of the Central Bank: the ability to fuel banks with liquidity, curb inflation, and influence the exchange rate was reduced.
As a result, in March, the dollar cost more than 120 rubles, and the euro – 130.
Following the rate hike, the monetary authorities restricted the movement of capital. Now neither individuals nor companies can freely send currency abroad. Only with special permits or large contracts.
“They introduced a commission for the purchase of dollars and euros. They restricted the export of funds from the country. They obliged domestic exporters to sell 80 percent of foreign exchange earnings,” recalls Mikhail Bogdanov, founder of the Koshelek.ru service.
Then some measures were canceled, and some weakened. But the ruble continued to strengthen.
It is curious that Turkey and Argentina acted in much the same way, Bloomberg analysts say. But it didn’t work out there. Since January, the lira has fallen 13 percent against the dollar and the peso 12.3 percent.
Meanwhile, on the Moscow Exchange, the dollar fell below 63 rubles for the first time since February 2020. Euro costs less than 65.
However, it is not correct to draw parallels in this case. The nature of crises is completely different. Deva-luation in Turkey and Arge-ntina is connected purely with domestic economic p-roblems. There are no Wes-tern sanctions, no retaliatory measures had to be applied.
An important role in the strengthening of the ruble was played by a sharp reduction in imports from the EU and the USA. “With a number of countries in March and April – minus 30-40 percent. Few people need dollars and euros. There is nothing to spend them on,” says Mikhail Bogdanov.
Other factors also played a role: many foreigners turned off their business in Russia, and there were fewer trips abroad. The transition to rubles when paying for gas supplies to “unfriendly countries” had an effect. The supply of foreign money has decreased and the demand for the national currency has increased.
Twenty European companies have opened acco-unts with Gazprombank, Bloomberg reports. Another 14 requested the necessary documents. According to Foreign Minister Sergei Lavrov, almost all key partners have agreed to pay for blue fuel under the new scheme. Poland and Bulgaria refused, but their contract ended this year anyway.
In addition, there are plans to switch to mutual settlements in national currencies with China, India, Brazil, Iran and the EAEU countries. The ruble will continue to be needed in large volumes.
How much is a dollar
However, many do not believe in the unexpected strengthening of the Russian national currency. Or they don’t want to believe. In Washington, what is happening is called “artificial pumping” of the Central Bank and the government. The course does not reflect the real state of the Russian economy, said White House Communications Director Kate Bedingfield.
Without the support of the authorities, the dollar would be worth 180 rubles, says currency strategist at Wells Fargo Securities Brendan McCann. “The ruble is strengthening in artificial, greenhouse conditions. In March, the circulation of the currency in Russia was limited. The measure was forced, but very timely. The initial panic subsided. The rush for everyday goods subsided. We managed to slow down inflation. In March, it accelerated against the background of a sharp devaluation of the ruble and a rise in prices foreign products,” says Mark Goykhman, chief economist at the TeleTrade Information and Analytical Center.
To determine the real exchange rate, you need to remove currency restrictions. Probably, the dollar costs about 75-85 rubles, suggests Goykhman. Meanwhile, the Western currency that has fallen in price against the ruble plays into the hands of the Ministry of Finance. Now it’s a good buy. The fact is that the lion’s share of gold reserves has been frozen, and no one has canceled the payment of external debt.
But the strong ruble has a downside. The main income of the budget consists of taxes from deliveries abroad. First of all, oil. The lower the revenue of exporters, the less money in the treasury. Because of this, there may not be enough funds needed for the implementation of investment and social programs. “This is dangerous, because the economy is shrinking, the incomes of the state, business, and the population are falling,” the expert continues.
The budget for 2022 includes an exchange rate of 72.1 rubles and the cost of Russian Urals oil at $44.2 per barrel. That is, the budget should receive 3186 rubles per barrel.
In addition, now domestic black gold is being sold at a big discount. A line has lined up for cheap raw materials – India, China, the countries of the Asia-Pacific region. Meanwhile, Washington continues to hit the domestic financial system. Congress passed a bill banning Russian special drawing rights (SDRs) issued by the International Monetary Fund from being exchanged for dollars. They can buy currency. Last year, Russia received a tranche of $18 billion. They entered the country’s gold reserves and at the end of April exceeded 593 billion – against 630.6 at the beginning of the year. Now there are even fewer opportunities to use reserves. But while it is allowed to change the SDR for currency in other states.
Analysts do not undertake to predict the course for the coming months. There is a unique situation on the market: the demand for the currency is reduced, and for the ruble it is sharply increased. Now, to a large extent, everything depends on the decisions of the Central Bank and the government, experts say. For example, the regulator previously announced a drop in the sale of exporters’ foreign exchange earnings to 50 percent. By inertia, the dollar can fall in price to 60-65 rubles. However, whether the monetary authorities really need a strong ruble is a big question. Comfortable for the economy and the budget, experts call the exchange rate in the range of 70-75 rubles.