Andrey Maslov: ‘The dollar will remain a common way to save money’

The ruble is forecast to weaken to 65-67 per dollar by the end of the year. The pressure on the exchange rate of the national currency will be exerted by a reduction in the current account surplus with an increase in imports, a drop in commodity prices, and a reduction in exports against the background of sanctions, experts say. More detail about how the ruble will behave — Andrey Maslov, an analyst at Finam, predicts in the author's column for Realnoe Vremya.

Central Bank and Ministry of Finance cannot weaken the ruble “safely”

The Russian currency continues to be in the range of 60-63 rubles per dollar, which has been quite familiar since the summer. The volatility of the Russian currency has not generally been as high since July as it was in the first months of the conflict in Ukraine. However, such stability does not come from positive aspects in the Russian economy, but rather as a side effect of economic pressure and problems that began on February 24.

In many ways, the Russian currency remains stable due to the imbalance in the trade balance, which occurred due to an unprecedented collapse in imports along with a not so severe drop in Russian exports. This led to an uncontrolled strengthening of the ruble in late spring and early summer, which entailed serious problems for the Russian budget, which, even despite record gas prices and high oil prices, is likely to close in deficit in 2022 precisely because of the too strong ruble.

Separately, we also note that after the introduction of restrictions by the Central Bank, the Russian ruble ceased in fact to be a freely convertible currency, and found itself under more serious state control. At the same time, now the Central Bank of the Russian Federation and the Ministry of Finance, apparently, cannot weaken the ruble “safely”. The thing is that if you cancel a significant part of the restrictions, the ruble may collapse below the required range of 70-80 rubles per dollar.

Parallel imports also cannot help the weakening of the currency

At the same time, softening the monetary policy or lowering the interest rate does not have the desired effect. Also, the ruble is almost not reacting to other market factors, such as aggressive tightening of the monetary policy by the Fed or an increase in the interest rate in the EU. This is largely due to that there are very few foreign investors left in Russia and there is no one to respond to such signals. At the same time, in general, currency markets are very similar to stock markets, where the emotional component of news plays a huge role, and in this regard, the fighting, the global crisis and political decisions have much more weight for investors than the “cliche” and expected decisions of regulators in such a situation.

The main factor influencing the Russian currency remains the conflict in Ukraine and the withdrawal of large companies from the country as a consistent result of this conflict. Despite the fact that since spring the Russian government has stated that parallel imports would develop. However, at the moment, parallel imports clearly cannot help the weakening of the currency, since in general it accounts for about 4% of imports in 2021. At the same time, it is impossible to track import and export statistics in fact, since the Central Bank stopped publishing data in the spring, and the figures can be heard from officials, which is still not reliable statistical information.

Ruble exchange rate can be divided into official and “market” one

With regard to saving savings, many Russian officials have been talking for months about the population switching to using “friendly” currencies. However, none of the proposed currencies is protective and suitable for storing savings. So the “information campaign” to support the “image” of the yuan among the population continues, and large Russian banks offer deposits. But still, the yuan remains a rather risky currency, although it is the most suitable for savings. If compared with the Turkish lira or Armenian drams, which are even more volatile and risky. The yuan is considered a risky currency largely due to the opacity of the political system and the vulnerability of investors from internal political decisions. It should also be noted that now the Chinese economy is under serious pressure against the background of another wave of anti-coronavirus restrictions, rumours about pressure on large technology companies from the state and the mortgage crisis.

And yet, most Russians either have no savings or they are less than $10 thousand. Therefore, a logical solution would be to use the “good old” American dollar, which continues to strengthen against the background of aggressive tightening of monetary policy by the Federal Reserve. Even if the dollar is officially banned from circulation in Russia, private exchangers and “gray” zones will remain, and the ruble exchange rate in this case will simply be divided into official and “market”, thereby returning the abbreviations “c.u.” familiar to many. You can use the yuan as a tool for diversification if you have serious enough savings in dollars, securities and assets. For ordinary Russians, the Chinese currency still remains low-liquid and not reliable, compared to the already familiar dollar.

Speaking of forecasts, most likely, the ruble will not be able to weaken to the required levels in the government of 70-75 per dollar, so by the end of 2022 it is more likely that the Russian currency will remain in the usual range of 61-66 per dollar while maintaining the current geopolitical and economic factors, the behaviour of which is extremely difficult to predict today.

Andrey Maslov

The author's opinion may not coincide with the position of the editorial board of Realnoe Vremya.