The dollar weakened significantly relative to the currencies of the ten leading economies in the world, reaching Wednesday, the lowest level over the last month and a half. Index the Bloomberg Dollar Index (consists of ten currencies of developed and developing countries) began to decline from the end of July. If, on 27 July he reached 1203 points, on 10 August, as of 14:00, he fell to 1174.
Long-term trend of the weakening of the dollar against currencies of leading economies can be traced to the beginning of this year — in January, the index reached 1253 points.
The weakening of the dollar in recent days, took place amid the release of weak data on the labor productivity of the United States, writes in his review on Wednesday, Sberbank CIB. However, the chief economist of the Eurasian development Bank Yaroslav Lisovolik believes that the main cause of the weakening of the U.S. dollar is the lower expectations of fed rate hikes, which investors prefer to invest in emerging markets. Previously, market participants had expected the repeated raising rates until late 2016, however, judging by the statements of the monetary authorities of the US and the indicators of macroeconomic indicators deterioration in economic growth and a number of leading indicators), this probability has declined, says Lissovolik.
The implications of the outcome of the referendum on the British exit from the EU (Brexit) also have an impact on currency preferences, says a senior analyst at money market IK “Veles Capital” Yuri Kravchenko. “Before the referendum, investors have gone from Europe, anticipating negative events, but the visible deterioration has occurred, due to which they again started to return back,” he added.
It is too early to speak about the weakening of the dollar as the trend until the end of the year, according to market participants. The risks of monetary tightening in the US remains, said Lissovolik. In addition, the dollar will affect the situation on the oil market, said Kravchenko. “Usually, the rise in oil prices, the dollar weakens and Vice versa,” he says.
If interest rates will not rise and the dollar will remain weak positions, it will be favorable for ruble — both directly via the exchange rate of the dollar, and indirectly through commodity prices, Lissovolik points. Therefore, we can say that the second half of 2016 can be a period of stabilisation for the ruble, provided that the fed won’t change rate, concluded the economist.