A year after devaluation: what was life like for the ruble and what to expect

A year after devaluation: what was life like for the ruble and what to expect

Many analysts believe that the ruble 2016 will be a winner. According to the forecasts, the dynamics of oil remains the most likely area $ 50 per barrel.

MOSCOW, 16 Dec. Dmitry Mayorov. The dollar and the Euro against the ruble finish 2015 up to 25% and 15%, respectively at the prevailing during the reporting period effect from decrease of the oil market, reinforced by Western sanctions against Russia.

The key rate of the CBR almost returned to the level of a year ago (11%) after a surge to 17% last December from a level of 10.5%.

Exchange rates among the major reserve currencies are now close to a record in 2015 reached in January, however, oil prices are considerably lower then shocked the market price tag of 50 dollars per barrel mark Brent. The financial system of the Russian Federation is gradually becoming acclimated to oil shocks and this December is learning to live with the price below $ 40 per barrel.

Analysts ‘ forecasts for 2016 is quite a consolation: the oil should be adjusted upwards, and the ruble strengthened.

The Central Bank coped with the effects beginning of free swimming

The rise of courses of the dollar and the Euro against the ruble intensified in December of last year, ended with the establishment of 16 December psychologically significant record values in the region of 80 rubles per dollar and 100 rubles per Euro. However, only for December 2014, the dollar rose by 14% and the Euro by 11%.

Such a shock in the currency market in the panic of the fall and liquidity demanded a reaction from the Central Bank. However, after starting in November of 2014 the free float of the ruble, the Central Bank has decided against mandatory currency interventions, leaving the possibility to use them only in emergencies.

As a tool of influence has been used key rate, which was increased in December of 2014 at an emergency night session immediately by 6.5 percentage points to 17% per annum.

Immediate market reaction is not followed, and the beginning of the year was marked by the inertia of the weakening of the ruble after the shock and hesitation of December last year.

However, the hard decision of the Central Bank of the Russian Federation established the basis for the carry trade in favor of the ruble as investors beneficial to take the dollars in low-interest loans, to convert into rubles and place them in ruble instruments at high interest rates. Probably many of us remember about the Deposit at 20% per annum in rubles made in Russian banks in the beginning of the year.

This carry trade has developed since the end of January to mid may 2015. A good way this period was a time of strong oil, which shot nearly 40% to around 70 dollars per barrel Brent. As a result, the dollar during these 3.5 months lost more than 23 rubles from nearly 72 rubles, which is still a record 2015 (71.85 rubles).

By the way, the dollar that went down in may below 50 rubles, scared of the financial power, because a too strong currency is a threat to the budget.

However, a series of cuts in the key rate of the Central Bank (and thus minimize the carry trade) and the renewed fall in oil prices brought by August the dollar in the area of highs of the year (higher than 71.5 ruble) that have not been rewritten only by following the rebound of crude oil up. It helped the rouble to recover. The dollar in September was fluctuated in the range of 61 to 63 of the ruble.

However, the rebound of oil up was fragile, and the completion of the year goes under the sign of oil in the region of 36 to 38 dollars per barrel. However, the economy and financial system of the Russian Federation has gradually adapted to the oil shocks and the ruble demonstrates relative stability.

So, oil prices fell in the district multi-year lows — with the end of 2008, below which they were not at all as much as in the summer of 2004. However, the dollar and the Euro has not even reached the highs of 2015.

The Central Bank’s skillful use of REPO

Besides the base rate, CBR has learned to manage the liquidity of the ruble and the dollar, creating a kind of their balance in the financial system that had the desired effect on the rate fixing of the ruble.

As a main tool have been used operations correspondent (weekly) and foreign currency (weekly, monthly and annual) REPO. The regulator has given roubles or currency into debt limit and controlling the rate of such grants.

Western sanctions against Russia was closed for Russian companies the possibility of monetary funding. In these circumstances, to spend foreign exchange reserves to maintain financial stability would be a grave mistake. That is why we have introduced foreign currency REPO operations, when the economic actors for their own needs borrowing that does not affect the volume of foreign exchange reserves and thus on the exchange rate.

The Central Bank imposed a limit on these transactions by determining the maximum debt at $ 50 billion. In fact at maximum in 2015 was taken a little over 30 billion, and by the end of the year it fell below $ 30 billion.

Apparently, economic agents have learned to manage their foreign exchange costs and annual currency REPO even suspended in the second half of the year in the absence of a demand for them. However, the December surge in the volume of foreign currency payments on corporate debts necessitated the return of the annual REPO, but the demand still was not high.

Interventions to support the ruble ended

The last time foreign exchange intervention to support the ruble by the Central Bank of the Russian Federation held the day before the collapse of the ruble — December 15, 2014.

After this intervention to support the ruble was from the accounts of the Ministry of Finance, which in December 2014 and January-February-2015 was selling its currency balances to support the ruble at an aggregate amount of up to $ 4 billion.

Moreover, from mid-may to late July, the Central Bank entered the market with the purchase of dollars. Just then they cost from 50 rubles, and the tactic of the regulator have created a strong support of the American currency in the “fifty dollars”, which allowed market participants to talk about the irrelevance of the financial authorities of the cheap dollar.

These purchases were carried out in the framework enunciated by the Central Bank of the Russian Federation plans to increase reserves to $ 500 billion. However, in 2.5 months the Central Bank could only buy about $ 10 billion. The current volume of reserves is about 365 billion dollars.

The ruble price of oil — signal stability

About the ability of the Central Bank of the Russian Federation to indirectly control the exchange rate may signal dynamics in rubles the price of Brent crude. For 2015 was dominated by a decline of about 3.8 thousand rubles per barrel at the beginning of the year to 2.6 thousand in December 2015.

On the anniversary of one of the most powerful of the collapses of the ruble, the currency of the Russian Federation could hit record lows because of cheap record for many years oil. However, this did not happen – the ruble as if off black gold. Oil became cheaper against the dollar faster than the ruble, and its price fell to multi — year lows in the area of 2.6 thousand.

This state of Affairs should certainly worry the Ministry of Finance, as budget revenues directly depend on the ruble price of oil.

However, apparently, before the new year holidays it was decided not to pay attention to the budget for the sake of financial stability, and panic in the market has not happened, even though oil is cheaper than 35 dollars for Urals brand only the CBR put in the economy scenario, in shock, and he already began to be implemented. Apparently, there are hopes that the current bottom for oil will not be passed down, and we are waiting for the rebound up.


Many analysts believe that 2016 will become for winning. District $ 50 per barrel Brent will remain more likely for speakers of black gold in 2016, said chief economist of the Russian office of Bank of America Merrill Lynch Vladimir Osakovsky.

In these conditions, some adaptation of the Russian economy to the current market conditions we can expect the dollar at the level of 65 rubles, he said.

When the price of oil at around 52 dollars a barrel the dollar will be around 67 rubles, said the chief economist of the Eurasian development Bank Yaroslav Lissovolik.

There is every reason to expect that once the markets will win back the US Federal reserve’s decision on interest rate, oil will go to growth, and the ruble may in 2016 to show growth against the dollar by 20 to 50%, says chief economist at Saxo Bank Steen Jakobsen.

In the center of attention of the investors is a two-day fed meeting that will end on December 16. The majority of investors believe that the regulator is most likely for the first time since 2006 will increase the base interest rate from 0-0. 25%, which will cause a significant increase in the value of the dollar.

Against the background of rising oil prices from 45 to 60 dollars per barrel of Brent, the dollar will fall from the beginning of 2016 from 64,4 rubles to 59 rubles to its completion, praised the chief economist for Russia and CIS at ING Bank Dmitry Polevoy.