The ruble has accelerated the decline, finishing the year at its lowest level since the collapse in December of 2014

The ruble has accelerated the decline, finishing the year at its lowest level since the collapse in December of 2014


MOSCOW, December 28. /Corr. Nikita Zharkov/. The ruble in the New year’s eve returned to the minimum mark since December 2014, when against the background of falling oil prices and the shortage of foreign currency liquidity, the dollar reached to 80.1 rubles and Euro exceeded 100 rubles Today, it is trading on the world stock exchanges resumed after Christmas and the price of a barrel of Brent oil fell by 2.5%, the dollar rose by 1,78 rubles up to 72,46 rubles, and the Euro jumped 2,02 RUB RUB 79,55 nevertheless, summarizing the results of 2015 experts say the success of the move the CBR to a floating exchange rate and we are looking forward to 2016 in anticipation of strengthening of the Russian currency.

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Since the beginning of year the ruble significantly fell. The loss of the ruble at year-end amounted to 28.6% against the dollar and 16% against the Euro. With the decline of the ruble was not smooth the fluctuations of the dollar during the year exceeded RUB 20 “This result can even be called good, considering that oil for the same period has fallen by 35%, while the currencies of some developing countries, such as Brazil, lost more than 50%”, – draws attention the expert of “BCS Express” Ivan Kopeikin.

The dynamics of the ruble exchange rate in 2015 were asked the factors that has manifested itself in the second half of 2014. The fall of the ruble began in June 2014 and by December last year the Russian currency has fallen against the dollar by 2.2 times. Oil prices have fallen from June highs of 2014 in the region of 115 per barrel to $ 75 in November 2014. Despite this steep drop in the price of oil, OPEC on 27 November last year, has maintained production quotas at 30 million barrels a day. This decision further pushed down the price of oil. Since then, oil prices fell by 50%, decreasing to current level of 37 dollars a barrel.

The successful transition to a floating exchange rate

However, not only the oil prices have an impact on the ruble exchange rate in 2015. “The rouble one-to-one not tied to oil via the structure of the economy. We are highly dependent, but not 100%. The correlation is somewhere in the 40-60% are quite normal, in line with the way we have arranged the system of Finance and economy,” says senior strategist at Sberbank CIB Vladimir Pantyushin.

The decline of the ruble in late 2014 accelerated after the decision of the CBR to let the ruble “free floating”. In November 2014 the Bank of Russia completed the transition to a floating exchange rate, dismantling from November 10 2014 the currency corridor, which existed in various forms for nearly 20 years – since 1995.

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“The transition was totally successful except for one day on 16 December 2014. It was a day that has become a big problem and reduced confidence in the currency, he added a significant part to inflation for the next few years just due to growth of inflationary expectations. Besides everything else, I think, was very good and very reasonable,” says chief economist for Russia and CIS “Renaissance Capital” Oleg Kuzmin.

On the night of December 16, 2014 the CBR on unscheduled meeting of the Board of Directors decided to increase the key rate (weekly REPO rate) from 10.5% to 17%. Simultaneously, the regulator increased the limit on foreign currency REPO for a period of a month from 1.5 billion to 5 billion dollars, and also decided to hold an annual currency REPO every week to satisfy emerged market, the shortage of foreign currency liquidity. In one day of trading on 16 December last year, the dollar jumped to 80.1 rubles. 15,66 rubles, and Euro to 100,74 rubles 21,87 RUB.

The current situation with the ruble weakening almost all different from the end of last year with the successful transition to a floating exchange rate, said Vladimir Pantyushin from Sberbank CIB. “There is ample comfortable sensation where the level of support of the ruble on the market, and not according to the stated guidelines of the Central Bank. In my opinion, this is very good progress. This maturing of the market, overall, is very quickly passed. Only a year has passed. The negative effect of the fall in oil prices we can’t avoid, but the expectations shocks, as in December of last year, it is already possible to put aside,” says the strategist.

The stabilization of the ruble and buy foreign currency to the Central Bank reserves

The beginning of this year was for the ruble is very positive. High key rate of the Central Bank gradually began to strengthen the national currency. Since the beginning of February of 2015, the ruble has turned to growth and by may has risen in price to dollar by 30%. The growth of the ruble in the beginning of the year was supported by rising oil prices, which from January to may has risen in price from 45 to 69 dollars/Barr. The situation was similar to the return rate of the ruble to a more conscious values after an emotional flight from the ruble in late 2014.

“If we exclude the fact that the ruble is heavily dependent on oil prices, which are difficult to predict, there are seasonal factors. February, March and April are quite strong seasonal months for the ruble,” – said the head of debt markets “URALSIB capital” Dmitry Dudkin.

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In April, the ruble was stabilized at 50 rubles per dollar, and in may the dollar several times fell below 49 rubles in April the first Deputy Chairman of the CBR Ksenia Yudaeva called the unlikely the fall of the ruble to 70 rubles per dollar in the fall in oil prices to 40 dollars per barrel. At that time the oil market had stabilized. This improvement of the situation on the currency market allowed the Central Bank to begin to replenish international reserves. From 13 may to 27 July, the RF Central Bank bought in the domestic foreign exchange market over 10 billion dollars.

“We have a new interesting perspective of the work of the Central Bank with the market. Because in principle the Central Bank formally is not involved except in extreme cases. In principle, the market left on its own, and the Central Bank, as a smart parent, watching him, but sometimes also to participate,” says Mr Pantyushin from Sberbank CIB.

All purchases of foreign currency did not become a systematic instrument of the Central Bank. Due to sudden changes in market conditions on the market in late July, when the dollar exchange rate has exceeded 60 rubles, Euro – 67 rubles, the Central Bank stopped buying currency on the market. And by the end of summer the rate of 70 rubles per dollar from an unlikely scenario, the Central Bank has become a real stock quote. Just one day of trading on 24 August, the dollar jumped to 2.54 RUB 71,64 rubles, having exceeded RUB 71 for the first time since 30 January, and the Euro has updated a maximum of year, certainly by 4,98 RUB RUB 83,62 Such an expensive single European currency has not been since December 17, 2014.

“The ruble was a weak currency and is quite free to fall with falling oil prices, but to grow it hardly give. Because the growth rate of the ruble leads to a deterioration of the balance of payments, consequently, the deterioration of fiscal indicators. Ruble control only on one side – on the side of the building, and to fall it is usually given quite freely. And this is one of the main problems that both was, and remains,” – says Dmitry Dudkin from “URALSIB capital”.

The impact of decisions by OPEC and the fed

From late August to October, the ruble began to strengthen again against the background of recovery in oil prices. By mid-October, the dollar dropped from 71,64 RUB RUB. 60,81 However, in early December, oil prices resumed its drop after the OPEC meeting. According to the results of 168 th meeting of the organization in Vienna on 4 December, the Ministers of oil of the OPEC has not taken a clear decision on production quotas. Currently the volume of oil production by OPEC members is estimated to be 31-32 million barrels/day. The previous quota was 30 million barrels/day. After the meeting of the organization of the price of a barrel of Brent fell to 36.1 per dollar – the lowest level since July 2004.

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It is the position of OPEC and the dynamics of oil remain the dominant factor for the ruble exchange rate in 2016. “For the ruble is the main issue for next year – how sustainable will the easing of oil prices at such low levels. If oil prices will rise, the dollar may be about 60 rbl. And if the price of oil will remain at the same low level, and the market consensus shifts to expectations that oil will be this cheap for long, one cannot exclude another jump in capital outflows and the weakening of the ruble,” – says Oleg Kuzmin from “the Renaissance the Capital”.

In addition, OPEC is still one of the factors that have in 2015 the pressure on oil prices was the rise in the dollar in expectation of tighter monetary policy in the United States. On 16 December the fed decided to raise the benchmark interest rate by 25 b.p. to 0,25-0,5%. The discount rate the fed last increased in June 2006 From December 2008 to December this year remained almost at zero – 0-0,25%.

“This event literally kept in suspense all financial assets. However, nothing in the result did not happen – the dollar in the next few weeks remained at about the levels it was before the increase”, says Ivan Kopeikin from “BCS Express”.

However, next year the fed has no influence on the Russian currency, as the ruble is going to feel nice due to the reduction of capital outflow, adds Oleg Kuzmin. “And it will occur even if the fed will raise rates. The primary external factor for the ruble will remain on oil prices. As for the fed, I think their policy does not create special risks for the ruble next year”, – the expert believes.

Expectations and forecasts for 2016

Despite record low oil prices the rouble has good chances to strengthen in early 2016, experts say. The median consensus forecast of Bloomberg implies the dollar at the level of 68 rubles in the first quarter of next year, while the Euro – on a mark 70,9 RUB.

“Even at current levels of oil, if oil prices will not be very much further to fall, the ruble will significantly strengthen early next year. The exact levels are hard to call, because we don’t know where oil will be. But we think that in the beginning of 2016, the ruble will strengthen,” predicts Oleg Kuzmin from “the Renaissance the Capital”.

Excluding the decline in oil prices in the next 4 months is moderately positive rate of the ruble, adds Dmitry Dudkin from “URALSIB capital”. “The first 4 months of 2016 could be quite positive for the ruble. Could see some strengthening of the Russian currency, can be return to the level of 60 rubles per dollar, if there is no further decline in oil prices that, unfortunately, it is quite possible,” he said.

As previously stated Deputy Prime Minister Arkady Dvorkovich, now no one can make predictions of the movement of oil prices. According to him, the prices can remain at current levels or decrease for a few dollars, but it can happen and the reverse movement in the next year.

At the same time, in the absence of any positive developments in the oil market, beginning next year, and may well have some weakening of the ruble against the background of significant decline in the supply and reduced trading activity, warns the chief economist for Russia and CIS ING Bank Dmitry Polevoy. “But our estimates do not involve any excessive and uncontrolled weakening of the ruble below 74-78 rubles per dollar, even with oil at $ 30-35/ bbl,” said he.

According to the median forecast by Bloomberg, the average price of Brent crude oil in the 1st quarter of 2016 is estimated at us $ 50/bbl.