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With regard to oil and the situation in the economy: experts predicted the decline in the dollar, euro and yuan in May

Photo by Dorné Marting on Unsplash

In April 2023 the Russian currency showed mixed dynamics on the Moscow Exchange. At the beginning of the month the dollar fluctuated in the range of 77-79 rubles, euro – in the range of 79-86 rubles, while the yuan rate – near 11.2-11.5 rubles. During the next four weeks, values at some point rose to Br83.5, Br95.8 and Br12.1, respectively – the highest levels over the past year, but by early May, they dropped to Br80.3, Br88.7 and Br11.6.

“Exchange rates at Mosbirzha are determined by the balance of demand for foreign currency and its supply. In April the demand for currency from the importers looked stable, as well as its supply from the exporters. Therefore, probably, ruble weakening in April was related to departure of some foreign companies from Russia,” Oleg Syrovatkin, leading analyst of global research department of Otkritie Investments, told .

For example, in early April, the ruble may have reacted to the news that the British company Shell exchanged and withdrew from Russia the proceeds of $1.2 billion from the sale of its stake in the Sakhalin-2 project, Bloomberg wrote. This led to a temporary spike in demand for foreign currency and, consequently, the weakening of the ruble, experts say.

To avoid such situations in the future, authorities are going to introduce restrictions on the purchase of foreign currency by foreign investors out of Russian assets. This was announced by Deputy Finance Minister Alexei Moiseyev on April 27.

“This limit will be uniform, of course. The idea is that there would be no impact on the foreign exchange market. That is, it means that, conditionally speaking, the Commission allowed for such and such a price to sell the business, but you can buy currency within a certain period, so as not to violate the limit,” TASS quoted the deputy minister.

Nevertheless, the April depreciation of the ruble could, to some extent, play into the hands of the Russian economy, as the country’s budget fill rate has improved. This opinion was shared with by Alexander Razuvaev, a member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers.

“For example, oil producers sell oil mostly for foreign currency, but they pay taxes in rubles. So the higher the dollar, euro and yuan exchange rates, the more the export goods are worth in rubles, which means that the treasury receives more taxes,” Razuvaev explained.

However, the recent weakening of the ruble was not connected with the deterioration of such long-term indicators of Russia as inflation or the balance of payments, the director of macroeconomics and financial markets analysis at Alfa-Capital Asset Management explained to . In this regard, the expert does not exclude the possibility of strengthening the national currency in the coming months. Alexander Razuvaev has a similar assessment.

“The increase of the volume of foreign trade is in favor of the ruble. Also we have pretty good macroeconomic indicators now, including inflation, which has already fallen below the Central Bank’s target of 4%. In addition, we’re seeing some good dynamics in industrial production. Overall, the recovery of the Russian economy should be good for the ruble,” Razuvaev told .

According to the latest estimates by the Ministry of Economic Development, annual inflation in Russia has slowed to 2.55%. The last time a similar figure could be observed was back in the spring of 2020. Meanwhile, industrial production has returned to growth after 11 months of continuous decline and increased by 1.2% year-on-year in March, according to the Federal State Statistics Service.

Against this background, according to experts of the Central Bank, this year the Russian economy should also take a positive trajectory and add up to 2%. The Kremlin predicted similar figures.

“If you look now at the economic picture, it allows us to speak with a certain optimism about what we have… The levels of business confidence of both businesses and the population are at multi-year highs, and somewhere even at absolute records. GDP will grow by 1-2% for the year as a whole,” said presidential aide Maxim Oreshkin on April 25.

In addition to the general improving the situation in the Russian economy, in the near future one of the determining factors for the ruble will remain the dynamics of oil prices, experts say. Starting from May and until the end of 2023 the countries-participants of the OPEC + agreement are planning to reduce oil production by a total of 1.66 million barrels per day. This measure was adopted in early April in addition to the previously approved reduction of hydrocarbon production by 2 million barrels per day.

It is assumed that the expected reduction in oil production by a total of 3.66 million bpd will lead to a reduction in energy supplies to the international market. This, in turn, should become a reason for the growth of world oil prices.

“In addition, global demand for fuel may strengthen in the second half of the year and also support oil prices. At the same time, we also expect a subsequent reduction of discount, with which Russian oil is sold. In the future, these factors may support the ruble,” said Oleg Syrovatkin.

The specialist believes that during May the dollar, euro and yuan exchange rates could still rise to the levels of 83.5, 93 and 12.3 rubles respectively. Meanwhile, Mikhail Seltzer, an expert on the stock market at BCS World Investment, suggested in an interview with that by the end of spring the value of the U.S. currency may drop below 80 rubles and continue to move toward 77 rubles.

“The euro may fall to 85 rubles, and the yuan – to 11.3 rubles. The chance to reach these values by the summer remains very significant,” Zeltser concluded.

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