How to change the ruble exchange rate due to currency interventions of the Ministry of Finance

In February, the Ministry of Finance and the Bank of Russia will start buying currency on the domestic market to replenish reserves. The volume of interventions of the Ministry will determine monthly depending on the amount of oil and gas windfall of the budget. That is, if the price of Urals oil exceeds the budgeted level of $40 per barrel, the Finance Ministry will start to buy dollars in the amount of additional revenues from exports of oil and gas. In the case of the correction in oil prices below $40 per barrel, the Ministry will sell the currency.

The Bank of Russia stated that the decision to intervene will not affect his approach to monetary policy — the exchange rate will remain floating. As noted in the analytical review, the IC “Aton”, the total additional oil and gas revenues in 2017 may reach 1.1 trillion rubles, or about $18.5 billion at the current exchange rate. Thus, the monthly volume of interventions of the Ministry of Finance and the Central Bank will amount to about $1.6 billion, which is not a very large sum for the currency market. Analysts surveyed by RBC, agree that the impact of intervention on the exchange rate of the ruble against the dollar and the Euro will be limited and will not cause a major correction.

Vladimir Tikhomirov, chief economist at BCS

The dollar in February: 59-60 RUB.

The dollar by the beginning of summer: 61-62 RUB.

“Foreign exchange intervention of the Ministry of Finance will have a major impact on the ruble exchange rate in connection with small volume of anticipated transactions is just $50-100 million a day. By the end of first or beginning of the second quarter, we expect the dollar level 59-60 RUB But in the spring the price of a barrel of oil may decline in the seasonal factor to $50, which will trigger a strengthening of the dollar to the level 61-62 RUB thus our prediction about the average values does not change: $56-58 per barrel of Brent.

On the dynamics of the Euro exchange rate is influenced by quite different factors. First, it is the policy of the United States in the field of international trade, and secondly, the internal problems of the European Union, including Brexit and problems in the banking sector. I think this year, the Euro may weaken to $1,05–of 1.07″.

Denis Poryvai, an analyst at Raiffeisenbank

The dollar in February: 63-65 RUB.

The dollar by the beginning of summer: 62 RUB

“Ceteris paribus the rate of the ruble to the dollar to be adjusted due to currency interventions of the Ministry of Finance for 3-5 RUB with the Euro pegged to the dollar, there will be a corresponding correction in the Euro/ruble. In General, our baseline forecast for the ruble this year has not changed. We assumed growing with an average annual oil price of $56 per barrel and the price at year-end $62 per barrel. We laid in the forecast the scenario that at such prices for oil will be intervention. The ruble will average 62 rubles per dollar. The correction of this forecast, we probably won’t do that.”

Alexander Losev, General Director of “Sputnik — capital Management”

The dollar in February: 60-62 RUB.

The dollar by the beginning of summer: 63-65 RUB.

“The fact that the purchase and sale of foreign currency will be engaged in the Ministry of Finance and not Bank of Russia, right. Because the Ministry of Finance buys foreign currency at the expense of extra (oil) revenues, and the Central Bank through the issuance of rubles. So now would not be such pressure on the ruble, which has provided Central Bank with its interventions in 2015, when his purchase of the ruble dropped 20% with a relatively stable oil.

In the future, the exchange rate of the ruble to the dollar will be much stronger impact of monetary and industrial policy of the United States. The first fed rate hike in 2017 will happen most likely in June, and in the second half, if the macroeconomic indicators in the US will be strong, fast growth rates. Accordingly, it will put pressure on all world currencies and assets and the ruble will cease to be strengthened.

The Euro is more influenced by the ongoing policy of quantitative easing in the EU and possible strengthening of the dollar. And in the second half, I believe, may well be parity between the Euro and the dollar. Most likely, the Euro exchange rate in February-March will return to the levels of 62-63 RUB”.

Yaroslav Lissovolik, chief economist at Eurasian development Bank

The dollar in February: 60 RUB.

The dollar by the beginning of summer: 60 RUB.

“This factor will really be few to contain the strengthening of the ruble. But from the point of view of the volume of transactions it is hardly possible to speak about any radical influence. Such measures reinforce the exchange rate at levels close to 60 rubles per dollar. This parameter becomes an important landmark on the horizon of the next months. As for the Euro, now also we can expect some stabilization at those levels, which are now found the market. But during the first half of the year we plan several important events in Europe, including elections in France.

European factors may play a role in the growth of volatility of the currency pair dollar/Euro. Accordingly, this may give some splash or some swings on the pair rouble/Euro, but I don’t think these differences are very significant. Rather, the risks are biased towards a slight weakening of the Euro against the ruble and the dollar. My Outlook for the pair rouble/Euro until the end of February — 64 rubles. per Euro and 62-63 to the beginning of the summer.”

Andrei Shenk, analyst UK “alpha-Capital”

The dollar in February: 59-62 RUB.

The dollar by the beginning of summer: 59-62 RUB.

“Scheme of the Ministry of Finance at current prices for oil will lead to the replenishment of reserves and can keep the ruble from further strengthening. In the baseline scenario of the Ministry of Finance and the Central Bank laid the high price of oil and the flow of funds from foreign investors. In my opinion, these assumptions may not be justified: not the fact that the oil price will not fall, as foreign investors lose appetite for risk and, consequently, the interest in Russian assets. In any case, to have on the situation, a significant influence of the Ministry of Finance will not. If in the early or mid-year non-residents will still support the ruble by the end of the year due to the decrease rate of the Bank of Russia and the rise of the rate of carry trade will cease to be profitable. Therefore, the excess currency we will not. I believe that by the end of the year, the dollar may rise to 64-65 RUB.

Based on fundamental factors, we can say that the Euro should strengthen against the dollar. But in the case of European currency much depends on the political situation and the structural problems of the Eurozone: high debt in some countries, relations with the United States, problems in the banking sector and the mild policy of the European Central Bank.”

Egor Susin, chief expert, center for economic forecasting of Gazprombank

The dollar in February: 60 RUB.
The dollar by the beginning of summer: 61-62 RUB.

“The volume of purchases that you plan at current oil prices, more or less clear — about $20 billion In this case, the impact on the rate will certainly be, but essentially the situation does not change. According to our estimates, concerning the course that might be without these purchases, the change will be at the level of 5%. That is, the ruble during the year will be about 5% weaker than if the purchases were not. In the first quarter is traditionally a sufficiently large export revenues, low import volume, plus there is no ruble liquidity. Therefore, I would not expect that in February the rate will be higher than 60 rubles per dollar. At the end of spring and early summer forecast 61 to 62 rubles per dollar.

In the pair rouble/Euro will be determined by the Euro-dollar exchange rate. US gradually raise rates, and Europe while continuing the program of monetary stimulus. But after the April purchases by the ECB will shrink the Euro against the dollar could strengthen somewhat. Accordingly, the Euro may cost 64,5 RUB in February and 65-66 RUB at the end of the spring.”