Sanctions noose: the ruble is falling to the bottom


Санкционная удавка: рубль падает на дно

New anti-Russian sanctions of the USA for two days brought down the position of the ruble. The official Euro grew by almost 5 rubles, dollar — 3.8 RUB In some Metropolitan exchange value of the Euro reached Tuesday to 80-90 rubles. The reassuring statements of the officials do not help the national currency, and sellers of imported goods have already announced price increases. The US plans to impose new sanctions against Russian government debt, so depreciation of the ruble will continue, experts say.

Just took off and flew

Black Monday was replaced by “dashing” on Tuesday, when revived was at the opening of trading the ruble has gone even further into the red zone.

The official rate of Euro established by Bank of Russia for April 11, has grown almost on 5 roubles to 76,85 rubles, the dollar — 3.8 RUB RUB to 62.36

During the auction the price of the dollar at the peak reached 63,95 RUB, the value of the Euro has already surpassed 78 RUB.

So the market reacted to new U.S. sanctions that the us Treasury has published 6 APR. The list of persons and companies under the limitations, was so unexpected that, initially, neither the investors, nor do the defendants failed to appreciate the seriousness of the situation.

The list includes 15 Russian companies and 24 official and businessman, including the head of “Gazprom” Alexey Miller, the businessman Oleg Deripaska, the head of VTB Andrey Kostin and the owner of “Renova” Viktor Vekselberg. Among the companies that appeared in the list of persons of special categories of prohibited persons, most of the list are companies associated with Oleg Deripaska: Agroholding “Kuban” investment company B-Finance, “the EuroSibEnergo”, “RUSAL”, the holding company Russian machines, GAZ group, Basic element and En+ Group.

Shares of “RUSAL” began to fall on Friday, dropping in price by more than 20%, however, the main record of aluminum holding was still to come — Monday on the Hong Kong stock exchange of papers “Rusala” have lost more than 50% of the cost, and the company published a release to investors, which warned about the possibility of a technical default. The reaction of investors has affected the entire Russian market.

To the close of trading on Tuesday the ruble dropped to 63 units of the Russian currency to the dollar, the Euro was worth 77,7 RUB.

The falling value of the ruble are now more likely to panic, said a leading analyst of the Forex Optimum Ivan kapustyasky. Of adds fuel to the fire and that the United States has announced new sanctions after a chemical attack in Syria.

If the conflict will be continued, to the level of 65 rubles to the dollar rate may reach in a matter of hours, warns analyst social network for investors eToro in Russia and the CIS Mikhail Mashchenko.

Don’t worry, be happy

Russian officials prefer not to take panic in the stock markets seriously.

The head of the Central Bank Elvira Nabiullina in the Stock forum said that the regulator does not see any risks to the financial stability of Russia and reminded that “the Central Bank has a wide range of tools in order to act in different situations, if there are risks to financial stability”. “In our view, now there is no such risk, there is no need to apply any systemic action,” she said, adding that the increased volatility in the markets is temporary, and the Russian economy is adapting to new conditions.

The Finance Ministry has said it has no plans to change the rules in the foreign exchange market due to sanctions, ie will continue to buy the currency for cheaper rubles in the same amount to replenish the Fund.

The head of the Ministry Maxim Oreshkin called the incident “a good test for the macroeconomic design, which the government and the Central Bank are building the last few years.”

At a meeting with Russian President Vladimir Putin, Prime Minister Dmitry Medvedev said Tuesday that the situation in the Russian economy is absolutely stable.

Of the General positive picture is slightly behind the decision of the Ministry of Finance not to hold on Wednesday, April 11, the auction on placement of Federal loan bonds (OFZ) “in connection with adverse market conditions”. According to Bloomberg, this is the first by the Ministry of Finance cancelled the auction of OFZ from August 2015.

Six months rates to wait

The negative development of the situation with ruble can greatly devalue a two-year Central Bank efforts to curb inflation, draws the attention of Global FX investment analyst Ivan Karyakin.

The Central Bank has set inflation target of 3-4% by the end of 2018.

If the exchange rate of the ruble to the dollar will not return to traded since December of last year, the band 57-59 rubles per dollar, and will remain at least at the level 61 of the ruble, we will get a couple of months 7% inflation in annual terms. But if the rate will remain at 63 rubles per dollar, inflation will accelerate to 8-10%,

emphasizes Koryakin. And after inflation there will be problems with economic growth, which is barely noticeable, the expert adds.

The situation currently prevailing in the stock markets, serious economic growth will not be affected, however, will require Central Bank for more attention to inflation, says former Finance Minister and head of the Center for strategic development Alexey Kudrin.

“I think to expect a rate cut of the Central Bank in the next six months is not worth it”, — he said.

The Central Bank this year has twice lowered its key interest rate — 9 February and 23 March, each time moving by 25 basis points. Last year, the Central Bank lowered the rate six times, for a total of 2.25 percentage points, the regulator has given a signal that in 2018, the reduction of the key rate can take several pauses.

In the current situation, taking into account inflation and political risks the Bank of Russia may pause the reduction of the key rate at least until June-July, and perhaps even until September, when the situation becomes clearer with the harvest this year, says chief economist BCS global markets, Vladimir Tikhomirov.

It is obvious that in the conditions of panic in the domestic foreign exchange market, the Central Bank of Russia should not reduce the key rate, the main agrees the analyst of “Broker Groups” Oleg Bogdanov. Rate reduction may amplify the negative trend for the ruble, the impact on import prices, thereby increasing inflation and inflation expectations, the expert adds.

After another rate cut in March, the Bank of Russia promised that it will “continue the reduction of the key rate and will complete the transition to a neutral monetary policy in 2018”. However, it is possible that these plans will be adjusted.

The complacency with which the Central Bank looks at the collapse of the ruble, surprised, says Russian presidential adviser Sergei Glazyev. “Instead of having to take the standard for financial control measures, the Central Bank promises to speculators not to take provoking the attack on the ruble. Thus, contrary to common sense States that the free floating of the ruble DAMPS external shocks, while it is clear that, on the contrary, it strengthens them,” says the official.

The Central Bank may intervene in the course of trading currencies, ensuring the supply of dollars, enter any limitations on or exemptions for banks and, finally, to raise the rate, said Koryakin. While the Central Bank stands on the sidelines, waiting for lower volatility and stabilize at some level, but if this does not happen, the rate increase will be inevitable.

If the fever in the Russian market will not end quickly, it will mean a fundamental change of view on Russian assets as a whole, the Central Bank will have hard and increase in the key rate cannot be avoided, perhaps even more than once. All have to start from the beginning, says the expert.

New sanctions against Russia

Experts agree in opinion that in the future, investor sentiment will largely depend on the measures that will declare the government in support of the sanctions companies and further tightening of restrictions.

If we see a further escalation in the area of sanctions and counter-sanctions and geopolitics, the market can stabilize and slightly recover in the coming days, said Tikhomirov.

However, the hope is weak.

So, the US Congress has prepared a bill on further expansion of sanctions, which, if adopted, would ban US citizens, legal persons and companies participate in transactions in sovereign debt of Russia.

The document is called “an Act of solidarity with Britain against violations of Russia”.

The new sanctions package includes a complete ban on any financial transactions related to public debt of Russia. In addition, under the restrictions can get the transactions involving securities issued by the Central Bank, the national welfare Fund and the Federal Treasury.

Also, the restrictions can get Sberbank, VTB, Gazprombank, Bank of Moscow, Rosselkhozbank, Promsvyazbank and VEB.

As the reason of strengthening sanctions pressure indicated in the document “part” of Russia in the “Skripal” and “other reasons”.

According to Reuters, the initiative of Democrat Joaquin Castro and Republican Mike Turner shall first consider the house Committee on foreign Affairs. If approved it will be submitted for the final vote in the lower house of Congress. Further, the document must pass through the Senate, then be signed by the President of the United States Donald Trump.

Worse sanctions against Russian businessmen and companies can become restrictions on the sovereign debt of Russia. Such a move would be a real economic war, said the head of RSPP Alexander Shokhin.

“If, God forbid, the Americans decide to attack sovereign securities, it is possible that a flight from sovereign bonds (in addition to the current outflow from the stock of the companies subjected to — note).

But I hope this will not happen, because it’s a real economic war — worse isolation suffered by the USSR during the cold war,” — said Shokhin.

Judging by the aggressive rhetoric of the representatives of the countries of the West, they are quite serious and it means that we should expect another accusations and threats against Russia, which, of course, will have a negative impact on securities and currencies, said Mashchenko. In the context of this uncertainty for long-term investors it is logical to reduce their investments in “toxic” assets, he adds.

What will happen to the ruble

Experts do not exclude that the trend in the decline of the ruble this week will continue, and with him the rising prices.

If you look at the structure of Russian imports, the increase in the exchange rate should affect the prices of agricultural raw materials and foods (12.7% in the import structure), both directly and through the growth of production costs in the manufacture of which used imported agricultural raw materials,

says chief economist IK “Russ-invest” Alexander Harutyunyan. The same can be said about products manufactured by foreign investors on the territory of Russia, if their production uses imported components, for example, in the automotive industry. In the long term, according to experts, the price increase may also relate to products produced in Russia using foreign equipment.

The sellers and distributors of household appliances, has already announced the price increase by 10-15%. And in the Association of companies of Internet trade mark high demand of Russians for home appliances and electronics.

In the currency exchange value of the Euro on Tuesday rose above 80-90 rubles.

The banks increased demand from the population for foreign currency is not noted. “In terms of cash, foreign currency operations no significant deviations are not observed, preserved normal operation characteristic of the current period of the year,” said Alfa-Bank.

“Overall, the growth momentum of customer activity balance for two days is close to zero — in the market there are sellers and buyers,” — noted in the savings Bank.

Russians fear a repeat of 2014, and some of them in the Wake of the panic can begin to stock up on dollars and euros. At the same time, the population will begin to get rid of savings in foreign currency in anticipation of the may holidays and the holiday season, says a leading analyst “Expert plus” Maria Salnikova.


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