Following the unique strengthening in April-May, the Russian currency began to lose ground. After a minimum of 71 rubles per dollar in May, the rate rose to almost 75. The market started talking about a possible change in trend: from strengthening to weakening. However, no one expects a sharp devaluation yet, but a smooth increase in the dollar/ruble exchange rate until the end of the year is now a working scenario.
The ruble exchange rate is a difficult indicator in terms of comfort. When it strengthens, ordinary citizens seem to benefit from this, because imported goods become cheaper and this generally helps to slow down inflation. In practice, however, it is difficult to notice a drop in prices for imported goods, because the store windows contain goods purchased at an even more expensive dollar. And when a conventional smartphone purchased by an importer in May at an exchange rate of 71 lands on the counter next to a smartphone purchased at an exchange rate of 80, it is unlikely that the buyer will see different prices for one product in the store. But the appearance of new promotions and discounts on individual models in June is very likely in this case.
On the other hand, the devaluation of the ruble, as a rule, is reflected in rising prices with some lag. And this is not to the liking of not only buyers, but also the Central Bank, whose main function is to keep inflation at an acceptable agreed level. The Bank of Russia now has four percent. And although annual inflation has reached the level of four to five percent, the regulator cannot relax. Because there are too many factors that can easily push inflation high, but bringing it down is a hundred times harder. The situation with attacks on Russian refineries alone is worth it, but here the ruble is also beginning to weaken.
The paradox is that from the point of view of budget revenues, the weakening of the ruble - especially such a gradual one, and not sharp, as analysts still expect - allows one to breathe a sigh of relief. Because the strong ruble in April and May, in fact, prevented the budget from receiving even more windfall profits from expensive oil. Of course, oil sales at $100 per barrel and above greatly helped Russia earn extra money as a whole. But with a weaker ruble, income would be much more impressive. And, unfortunately, even the windfalls of recent months against the backdrop of the Middle East conflict could not completely close the deficit, which turned out to be too significant.
The sharp fall in oil prices to $74 per barrel against the backdrop of peace agreements in the Middle East does not contribute much to replenishing the Russian budget. The more the ruble weakens in such a situation, the easier it will be for the Russian budget to cope with low prices for black gold. From the perspective of ordinary citizens, a full budget with a non-critical (within the plan) deficit is also beneficial. Because it means fulfilling all the state’s obligations to citizens, including social ones. And in a broader sense: the more income in the budget, the more is spent on the prosperity of people and the real economy, the richer the country and its citizens.
There is a general quality of the ruble exchange rate for all market players. It is not beneficial for anyone if the ruble makes sharp jumps anywhere. A smooth devaluation of the ruble is, on the whole, a much more comfortable story for everyone, because you can prepare for it, it does not cause panic and it goes away more easily. Any shock story is chaos and confusion, when it is more difficult to make the right choice.
What made the ruble change its direction and begin to weaken?
First, oil dropped from $114, its peak in May, to $72 on June 26. This means that the influx of export earnings is also sharply decreasing, and the supply of foreign currency in the country is becoming smaller. In a few weeks, this story will become even more obvious, which will cause the ruble to continue to weaken.
Secondly, the operations of the Ministry of Finance and the Central Bank for the purchase and sale of currency have changed. In March-April, the ruble strengthened, partly because the Ministry of Finance stopped foreign exchange operations within the framework of the budget rule. He stopped buying currency from the market, and as a result, large volumes of export revenue flowed into the country - due to the sharp rise in oil prices and because the Ministry of Finance stopped removing part of the currency from the market. Its volume has increased significantly compared to February. It is logical that the ruble strengthened to 71 per dollar in early May.
But now direct demand for foreign currency from the state has returned to normal, and falling oil prices have reduced foreign exchange earnings.
In addition, the demand for foreign currency from importers has also increased. This is the third factor of pressure on the ruble. Imports this year exceed last year's figures. That is, companies are buying more equipment, goods, and components in anticipation of increased demand or for future use. The population also helps to flush foreign currency from the market by purchasing it for tourist trips abroad. All these factors weaken the ruble.
However, the national currency is held back from too sharp a devaluation by the high rate of the Central Bank. The regulator, of course, reduces it nine times in a row, but the key rate still remains high, limiting lending and economic growth. In addition, from July, the Bank of Russia, associated with the National Welfare Fund, will stop selling foreign currency and the influx of almost another five billion rubles in the form of foreign currency into the market will cease.
