Russians’ confidence in the ruble is growing, even as they continue to buy dollars and euros.
Nationalist pride is worth every ruble. And there is data to prove it.
More and more Russians now prefer to hold their savings in roubles, a recent survey showed, as the Russian currency beat off Western sanctions to hit a seven-year high against the US dollar.
“Russians see the ruble as the best currency for keeping money with 43% of respondents in favor of it. This is almost twice as much as in January, and 10% more than in March…”, indicates a survey by the job search service Superjob.
Russian media group RBC said this level of trust in the national currency was higher than the 15-year survey average.
Only 12% of respondents now consider the dollar the most appropriate currency for saving money, while only 5% consider the euro.
In January, before Russia launched the “special military operation” in Ukraine, the dollar was considered the best currency for storing money by 23% of Russians and the euro by 15%.
The survey was conducted among 1,600 representatives of the economically active population from all regions of the country.
Although the sample size is very small – to paint an accurate picture – for a country of 145 million people, it is indicative of the wave of nationalist pride as Russians rallied behind President Vladimir Putin in his assault on Ukraine.
The study indicates that the level of confidence in foreign currencies is now about the same as in April 2015, when their exchange rates fell sharply after rising in 2014. This is also the highest level low at any other time when such investigations have been conducted.
The ruble has also been recognized by the world’s largest agency providing financial and economic information to professional financial market participants and individual businessmen.
In mid-May, Bloomberg named the ruble the best global currency in 2022 due to its growth against the dollar. The Russian ruble has become the leader among the 31 major currencies monitored by the agency’s experts.
They explained that the ruble strengthened due to the measures taken by the Russian government after the introduction of an unprecedented number of sanctions by the European Union and the United States.
The measures also include restrictions on Russian households on withdrawing their foreign currency savings.
But surprisingly, between April and June 2022, Russians bought a record volume of currency on the stock exchange in recent years – for 0.4 trillion rubles, according to a review of financial market risks, prepared by the Bank of Russia.
“Over a similar period in the previous three years, individuals also bought foreign currency, but in smaller volumes – 0.05, 0.2 and 0.3 trillion rubles in 2019, 2020 and 2021 respectively,” said said the Central Bank.
A total of 13 credit institutions, representing 77% of Russian banking sector assets, sold euros and dollars worth 2 trillion rubles between April and June. And it was mostly the currency received by export customers. The regulator then recorded a steady inflow of foreign money into the domestic market, as a result of which the banking sector formed excessive monetary liquidity.
However, it was the steady inflow of foreign currencies into the domestic market, while maintaining the restrained dynamics of imports, which contributed to the strengthening of the ruble.
“Between April and June 2022, the ruble strengthened by 38.2% against the US dollar and by 36.5% against the euro,” a Central Bank report said. And those numbers are changing. The rouble, or more accurately the decisions behind it, never cease to amaze.
The toxic money
Contrary to the fall in the price of oil, the ruble is strengthening against the dollar and the European currency. “According to our estimates, such dynamics are associated with a decline in demand for foreign currency and the continued activity of exporters trying to sell their foreign exchange earnings at a more favorable rate. It should be noted that the ruble looks much more confident than other currencies in emerging markets, which are adjusted against the background of lower risk appetite of investors,” Promsvyazbank analysts comment.
Alexei Antonov, head of investment advice at Alor Broker, draws the conclusion that was impossible six months ago: “The stronger the confrontation between Russia and Western countries, the more toxic dollars and euros become.”
In July, an almost historic phenomenon occurred: first, the rates of the dollar and the euro equalized, then the rate of the euro was lower than the rate of the dollar. “The dollar is more expensive than the euro on the Moscow Stock Exchange because we still have an exchange rate imbalance with world rates due to the risks of sanctions restrictions preventing inter-market arbitrage,” said Dmitry Babin , stock market expert at BCS. Global investments. According to him, arbitrage usually quickly brings the value of the same assets to different markets, including currency pairs.
The main pillar of the ruble is a trade surplus, and as long as nothing has changed in this regard, the ruble is unlikely to experience serious declines, says Vladislav Silayev, senior trader at Alfa-Capital Management Company. “It should be noted that the volatility of exchange rates – not only of the dollar and the euro but also of the yuan – will remain high until a certain equilibrium is reached in the parameters of exports and imports”, says the expert.
In May, when the dollar exchange rate on the Moscow Stock Exchange fell below 66 rubles per dollar and the euro fell below 70 rubles, it was a big problem. However, many experts said that the strong ruble was not beneficial for Russia in the first place and that the value of the currency would increase significantly by the end of May, at the most by mid-June.
Financial analyst and trader Artem Zvezdin, for example, said that if the ruble continues to strengthen, the government will have to cut budget spending. The strong national currency will also make the manufacturing industry less competitive: Russian goods and services will become more expensive on the international market and, therefore, less in demand.
Bogdan Zvarich, the chief analyst of the financial supermarket Banki.ru, estimated at the time that “the range of 70 to 75 rubles seems more adequate for the dollar/ruble pair. However, in mid-July, the euro and the dollar are worth a little more than 57 rubles”.
In the spring, analysts said that in the current situation, predicting currencies over the next year would be an unpredictable and thankless task.
However, even ordinary Russians, who no longer buy currency but curiously follow its developments, wonder what will happen to the ruble exchange rate next, and how the dollars and euros will behave against not only to the rouble, but to each other?
PSB chief analyst Yegor Zhilnikov, quoted by Investment, believes that the dollar’s growth against the euro could continue until the European Central Bank meeting, which will be held on July 21.
“You shouldn’t expect a constantly cheap euro. The current situation is mainly caused by global imbalances in world trade. When the ECB rate hike cycle begins, we expect the euro to gradually begin to regain its position,” the analyst said. According to its estimates, the dollar “will continue to strengthen and the course of the euro-dollar could fall to 0.85 dollar per euro”.
Dmitry Babin, equity expert at BCS World Investments, also operates with numbers: /USD in the $0.8-0.9 range. »
These experts have similar opinions regarding the EUR/RUB exchange rate in the fall and at the end of 2022. Egor Zhilnikov expressed the opinion that “at the end of the year, the exchange rate of euro could reach 79.9 rubles. end of summer we could see the euro around 70 rubles, by the end of the year – 75 rubles.
No financial expert will say today exactly how much money will cost, but time will.
Source: World TRT