Fairly high oil prices while continuing to support the ruble, helping him survive the current period of sanctions uncertainty. Meanwhile, experts argue not only about the possible timing and impact of new sanctions against Russia, but also reciprocal claims affected by the Russians.
As we expected, the ruble corrected slightly this week, after the previous oil prices soared above $71 per barrel of Brent.
In the following days, the main analyst of Bank “GLOBEKS” Viktor Veselov expects a trading range of 55.6-56.4 rubles/$. He noted that oil continues to be a guide for the ruble. Express the comparison of the dynamics of Brent and the dollar/ruble shows their clear relationship. Although you also need to consider the weakening of the dollar against global currencies due to the protectionist policies of the White house USA.
With oil consistently trading at high levels near $70 per barrel, despite the growth in US production to almost 10 million barrels per day and an increase in crude oil inventories. Non-residents are rushing to buy long OFZ before the imposition of U.S. sanctions. So last Wednesday the demand for long bonds exceeded supply by 4 times.
In January, said Veselov, the inflow of foreign liquidity on the Russian market could reach $500 million and above. Seeing high oil prices, foreign investors go to the stock markets and commodity economies, including in Russia. However, restrictions on the purchase of Russian debt will cause foreign investors to look for legitimate ways rim of sanctions against Russia, agreed the expert.
On a calm dynamics of the ruble – in the range of 56-57 RUB/$ counts and the head of Department of operations on the Russian stock market IR ‘freedom Finance” George Vashchenko. According to his definition, the main risk for the oil market is associated with an increase in production in the United States. However, there is a habituation effect to prices. The world economy grows, demand for oil also increases, and the current price level does not cause concern among market participants regarding their sustainability. At a price of $70 per barrel, the risks to the ruble and the economy is largely reduced. This is 40% above the level that would cause concern for the growth of the Russian economy, identified Vashchenko.
However, in the coming days, according to him, the ruble exchange rate will primarily affect the “struggle” of the Ministry of Finance with exporters. In response to rising oil prices, the Ministry will increase the volume of purchases of foreign currency.
Then as managing Director of macroeconomics and forecasting of the rating Agency “Expert RA” Anton tabah neat predicts the movement of exchange rate schedules to the mark of 60 rubles./$ and beyond. As he formulated, “with the faster pace of decline rates and the rapid growth of oil will see a 60 to 1 April.”
The head of the Bank of Russia Elvira Nabiullina told journalists that the regulator sees the space for monetary policy easing at the next meeting of the Board of Directors on February 9 (with the definition of the size of the corresponding step), but does not exclude a pause in the reduction in the base rate.
The forthcoming decision of the Central Bank of the Russian Federation Viktor Veselov said the main event for the ruble. The Central Bank does not rule out the reduction of the basic rate and the market lays its decline, at least 25 b.p. to 7.5%. Fundamentally, a rate cut leads to a short-term weakening of the ruble, but in his favor playing the oil prices and non-residents, reiterated the analyst.
After the decision of the Central Bank to reduce rates by 50 b.p. (instead of the expected 25 bps.p. in December) the results of the “double cups” would be too generous a gift, says Anton tabah. According to his definition, comments Elvira Nabiullina and statistics say about the upcoming lowering of the bar 25 b.p.
We will remind, among other things, on Thursday, Elvira Nabiullina also said that inflation expectations in Russia yet fall short of the target of the Central Bank, they are still not anchored and capable of responding to external and internal factors. According to the survey, commissioned by the Central Bank, in January, inflationary expectations of the Russian population remained near historic lows, at 8.9%. Although more and more Russians expect consumer price growth close to 4% after last year’s record level of 2.5%.
During the year, monetary policy will be mitigated, made Georgy Vashchenko, however, at the next meeting, the rate will not be changed. Betting on the market going down, but while they are still above the level of offers of the Central Bank’s Deposit auctions. Obviously, the regulator will cut rates in March by 0.25 percentage points – due to low inflation, stable exchange rate and industrial production growth. The ultimate level to which this year may be reduced rate is the level of 6.5% per annum, as the risks of investment in the Russian currency, with little difference in rates for dollars and rubles will frighten off investors from ruble-denominated instruments, said the head of Department of operations on the Russian stock market IR “freedom Finance”.
And as the above mentioned “fight” with the Ministry of Finance exporters, he continued, the increase in the purchases of foreign currency will help to keep the ruble exchange rate in a narrow corridor. Without this course, which is now made up of a ratio of about 4,000 rubles per barrel of oil (approximately 10% above a comfortable level for exporters and budget) would go down. “The risk of the ruble’s weakening amid the growth of currency purchases by the Finance Ministry, in my opinion, in the short term, no”, – concluded the analyst.
The Agency “Expert RA” also believe that while the Finance Ministry will stick to its program, and it at least does not allow the ruble to strengthen too much.
If the price of oil will remain high or continue to rise, estimated Victor Veselov, in February the Ministry of Finance will direct on purchase of foreign currency an amount similar to that was in January, about 258 billion rubles within one working day the volume of purchases may amount to 12-15 billion rubles. But keep in mind that the daily turnover in the foreign exchange market in the specified pair with calculations “tomorrow” up to 200 billion rubles And net purchases is difficult to determine because trade can be robots that are programmed to speculation. Therefore, the purchase of the Ministry of Finance is able to exert limited influence on the exchange rate, is still actively responding to the dynamics of oil prices, said the chief analyst of Bank “GLOBEKS”.
Last but not the day
Meanwhile, if the ruble has demonstrated a generally neutral reaction to the publication of the notorious “Kremlin report“ the U.S. Treasury on January 29, the situation with another report, which is expected on Friday (and may include restrictions on investment in Russian debt instruments), is fraught with negative consequences for the Russian currency, due to the outflow of investors, warns a number of experts.
However, Anton tabah is more inclined to assess the sanctions risks as unlikely, which, moreover, is already incorporated in the price. And Georgy Vashchenko reminded, that international trade is not stopped and in the period of the cold war, when the Soviet Union was under sanctions. Now times is clearly not worse than 30 years ago, and there was more friendly countries-importers. So that in Russia. overall, not afraid of new sanctions, summarized in “freedom Finance”.
While the official U.S. Department of state representative Heather Nauert explained that on January 29 execution signed by the President of the United States Donald trump in August 2017 law CAATSA has just begun. “The fact that we have not imposed sanctions on the very first day… in no way means that we will not introduce sanctions in the future”, – assured Nauert.
Commenting on the possible tightening of the sanctions regime, Department of international organizations and world political processes, Moscow state University. M. V. Lomonosov Andrei Sidorov stressed that globally, the main enemy for the U.S., obviously, is not Russia, and China. Russia also seems to be the weak link that in Washington tend to break down. And even if a certain part of the American administration and the President himself, Donald trump, perhaps, wanted to avoid further sanctions of aggravation (and this was due to the emergence of just such a variant of the “Kremlin report“, which caused dissatisfaction of Congress), it is impossible to exclude subsequent new sanctions. In particular, in relation to the ban on buying Russian government bonds by the Americans.
Though, probably, suggested Sidorov, the more urgent such a ban could be by the end of February-beginning of March in order to help to derail the ruble to the appointed on 18 March presidential elections in Russia. Another thing is how realistic it turned out similar calculations considering the share of OFZ bonds owned by U.S. investors and taking into account the possible steps on the part of China, the representatives of which, for example, expressed a negative attitude to lists such as the one presented in “the Kremlin report.“
By the way, his helpers, not being poor, could apply, say, in the circuit court of Washington with the claim about damage to their business reputation and appropriate material compensation. Moreover, if the judges would have supported at least one such claim, it would provide a precedent that in the Anglo-saxonicum law is crucial. But the very fact that the plaintiffs considered it was possible to play in the American field and American rules already would mean they win with outstanding information and image advantages, concluded the head of the Department of international organizations and world political processes, Moscow state University.
Theoretically, replied the partner of the company “Baker & McKenzie” Vladimir Khvalei, if a foreign person believe that US government agencies had violated their rights, they are entitled to sue at the location of the relevant structures. Although today the case is complicated by the fact that the criteria for violations of rights e.g. through the publication of the mentioned lists , is still uncertain, and their effects are not clear.
For example, some counterparties of Russian companies that are affected by the report, this whole story might become frustrated. But, regular partners, having found no practical consequences, obviously, will continue the cooperation, stipulated the praise.
Anyway, achieved by Russian athletes recent success in the arbitration field and here were encouraging.