Experts explained the November weakening of the ruble

Recall that in October, the ruble took the second place among world currencies in strengthening against the dollar – the exchange rate rose by 4.65% to the “American” for the month, reaching 80.5. At the beginning of last month, the dollar was trading for 85.7 rubles. However, in early November, the situation began to change. At the same time, there was a trend for cheaper oil: the cost of the benchmark North Sea Brent brand fell to a minimum since August 31, rapidly making the way from $114 per barrel to $98. And, apparently, after the end of the tax period, which peaked on October 28, the ruble lost significant support from exporters.

What will happen next, will the dollar reach 85 rubles in November?

“In my opinion, the situation is primarily related to the reduction in foreign currency sales by exporters after the October tax payments,” said Vladimir Chernov, an analyst at Freedom Global. Additional pressure on the ruble had announced by the Ministry of Finance increased purchases of currency under the budget rule. Taking into account the adjustment of the Central Bank, their net volume from November 9 will grow from 12.12 billion to 15.02 billion rubles a day, that is, almost 24%. The market began to account for this additional demand in advance. Lower oil prices also play a significant role, but the impact of this factor on export revenues is stretched over time.”.

As for geopolitics, it works both ways. Hopes for a resolution of the conflict over Iran are putting pressure on oil and, through it, on the ruble, while progress in negotiations on Ukraine could support the Russian currency at the expense of expectations of easing sanctions. According to Chernov, in the coming weeks, the exchange rate will fluctuate between 81-85 per dollar with the risk of a gradual shift to the upper limit if oil continues to lose in price. There is no reason to talk about the risks of a sharp collapse yet.

“We are talking about a set of factors affecting exchange rate formation,” notes economist Viktor Mangazeev. The first and most technical circumstance is the reduction in the supply of currency. In late October and early November, tax payments peaked: commodity companies actively sold currency to pay taxes, and this supported the ruble. Now that support has diminished. The second block of factors is external. Oil prices have adjusted markedly after the midterm elections to the US Congress: the market perceived their results as a factor in reducing the likelihood of new strikes on Iran and increasing the chances of a diplomatic settlement. It was the weakening of the risk of supply disruptions that put pressure on quotes. Oil reacted with a decline, discounts on the Russian Urals brand began to expand, including due to the increased supply of crude oil on the market.

At the same time, it is important to understand that the effect of the reduction in foreign exchange earnings will manifest with a delay, and its timing depends on the timing of settlements under contracts; at the moment, the situation with commodity quotes works rather through speculative demand for currency. According to Mangazeev, in the short term, internal, purely market factors — the tax calendar and the parameters of the budget rule — come to the fore. And oil and geopolitics set the medium-term trend and the overall level of risk. As for further dynamics, the baseline scenario for the coming weeks is trading the dollar in the range of about 81-84 rubles. At the same time, by the end of the year, a gradual weakening to 83-86 rubles is permissible against the background of seasonal growth of imports before the New Year and lower oil prices.

The main question now is not how much oil has fallen in price in a few days, but how long it will remain at lower levels. If the decline is prolonged, it will be more tangible for the ruble, said Denis Astafiev, head of the fintech platform SharesPro. We also need to look at what has changed in the market: terms of supply, settlements with customers, restrictions for exporters. In the coming weeks, I expect fluctuations with the risk of a moderate weakening of the ruble rather than a sharp jump in the dollar. There is pressure, but it is too early to consider further fall a foregone conclusion. Much will depend on how much foreign exchange earnings exporters offer the market, and whether oil prices hold. Now the key issue is the sustainability of these factors, not the very crossing of the 82 ruble mark.

According to the General Director of “Alfa-Forex” Guzel Protsenko, now the main pressure on the Russian currency has two circumstances. First, this is an increase in the volume of replenishment of reserves by the Ministry of Finance under the budget rule: in November it is planned to allocate 312 billion rubles for these purposes against 279 billion rubles, which were sent in October. This increases the demand for foreign currency. Second, global oil prices have declined markedly: Brent fell below $100 per barrel, and Russian Urals is getting cheaper even more, approaching $70 per barrel. This, in turn, affects the foreign exchange earnings of exporters. At the same time, interest in the ruble is supported by a high key rate: it limits the demand for foreign currency and makes ruble instruments more attractive.