The ruble continued to strengthen against the dollar and the euro during the day amid rising oil prices

The US dollar and the euro are declining on the Moscow Exchange on Monday afternoon, the ruble is growing against the dual-currency basket against the background of rising oil prices and in the context of exporting companies preparing for the peak of the tax period of the month.

The US dollar exchange rate was 56.3 rubles/$1 at 15:00 Moscow time, which is 88.5 kopecks lower than the closing level of the previous trading session. The euro cost 56.82 rubles/EUR1, depreciating by 1.15 rubles. The cost of the dual-currency basket ($0.55 and EUR0.45) decreased by 1 ruble to 56.5 rubles.

According to Interfax-CEA experts, the ruble is strengthening against the dollar and the euro in daytime trading amid rising oil prices and demand for ruble liquidity from exporting companies against the main tax payments in July.

The problem of ruble re-strengthening
The situation with the strengthening of the ruble exchange rate will change due to the reorientation of Russia to trade with neutral countries, said German Gref, President and Chairman of the Board of Sberbank.

„The ruble has strengthened for two reasons . Firstly, the transfer of currency abroad due to financial sanctions has become more complicated – the currency began to accumulate in bank accounts. Secondly, trade sanctions and self-sanctions of foreign companies have limited imports – it has become more difficult to spend the currency. Accordingly, it has become more difficult to contain strengthening of the exchange rate is possible either through foreign exchange interventions or by expanding opportunities for imports. Buying hard currency for the accumulation of the NWF is currently unavailable, so the Ministry of Finance is studying the possibility of buying the yuan and other soft currencies,” Gref told reporters in Derbent.

„Further on, the situation with the exchange rate will be corrected by restructuring logistics for trade with neutral countries,” he added.

The re-strengthening of the ruble worries Russian companies, primarily exporters. In an attempt to combat this process, there was even an idea to switch back to managing the exchange rate from inflation targeting.

The Ministry of Finance proposes to influence the exchange rate of the ruble in the conditions of its excessive strengthening through a new budget rule, while interventions should be carried out through the currencies of „friendly” countries. The Ministry of Economic Development does not support this idea, sees in it the risks of worsening the situation in the economy.

The Central Bank insists on maintaining the inflation targeting regime and the floating exchange rate of the ruble. “When external conditions change, the exchange rate immediately changes. Yes, we adhere to a floating exchange rate policy, because it is the floating exchange rate that allows the economy to adapt to changing conditions. devaluation, as we have already done,” the head of the Central Bank, Elvira Nabiullina, said earlier.

Oil prices
Oil quotes accelerated growth during trading on Monday, traders evaluate the results of US President Joe Biden’s visit to Saudi Arabia.

The cost of September futures for Brent on the London ICE Futures exchange by 15:01 Moscow time on Monday was $103.39 per barrel, which is 2.2% higher than the closing price of the previous session. The price of futures for WTI oil for August in electronic trading on the New York Mercantile Exchange (NYMEX) reached $99.3 per barrel by this time, which is 1.75% higher than the final value of the previous session.

Brent fell 5.5% last week, while WTI fell 6.9%.

Biden said following the visit that he had discussed with the leadership of Saudi Arabia the issue of oil supplies to the world market.

„We had a positive discussion on global energy security and reasonable oil supply mechanisms to support economic growth in the world,” he said. The politician also added that he expects from Saudi Arabia „further steps in the coming weeks.”

Meanwhile, Saudi ministers stressed that the decision to increase production will be made depending on market conditions and within the framework of agreements within OPEC +.

“We listen to our partners and friends from all over the world, especially from consumer countries,” said Saudi Foreign Minister Prince Faisal bin Farhan Al Saud. “But ultimately, OPEC + follows the market situation and will supply energy as needed.”

Analyst Comments
„At the beginning of the week, the global financial markets are dominated by favorable sentiment, which was to some extent facilitated by Friday’s US statistics. (. . .) An improvement in investor risk appetite allowed oil quotes to gain a foothold above $100 for Brent, and during today’s morning trading, the price rose to $104.35.At the same time, the dollar index corrected today to a weekly low.As a result, the ruble continued its strengthening in the Russian market, refreshing Friday’s maximum of 56.5 rubles/$1 in the first half of the day.Taking into account the upcoming large quarterly tax payments and dividend payments, we expect further recovery of the ruble’s position towards 55 against the dollar,” said Yury Kravchenko, head of the bank and money market analysis department at Veles Capital Investment Company.

“Although imports are recovering, but so far only moderately, and against the backdrop of increased export earnings and fears of blocking, the ruble continues to strengthen. rule to the government for further discussion.The ruble now retains the potential for strengthening, and the dollar-ruble pair by the end of the week may fall to 55 rubles/$1 due to the approaching tax and dividend periods,” say analysts at Bank Saint Petersburg”.

Rates on the market for short-term interbank loans grew slightly on Monday, while rates on the market for medium-term (1-6 months) interbank loans remained at the level of the previous trading day. MosPrime Rate „overnight” and on loans for a seven-day period rose by 4 basis points each – up to 9.53% and 9.56% per annum. The rate for a period of 1 month remained at 9.49% per annum, the rate for a period of 3 months – at the level of 9.53% per annum, the rate for a period of 6 months – 9.56% per annum.

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