Page 59 - RUSRptApr17

7.0 FX
RUSSIA -FX
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
Currency (units per EUR) (eop)
63.37
61.52
74.58
79.70
76.54
71.21
70.88
63.81
60.60
Currency (units per USD) (eop)
58.46
55.52
66.24
72.88
67.61
64.26
63.16
60.66
56.38
Currency (units per EUR) (average)
83.00
85.90
69.92
72.18
82.32
74.38
72.15
68.13
62.63
Currency (units per USD) (average)
62.19
52.65
62.85
65.86
74.59
65.88
64.62
63.07
58.82
Russian Economy Minister Maxim Oreshkin announced on April 18 that the ruble exchange rate will weaken to RUB62-68/$by the year-end: a level of RUB62/$will be reached under the current oil price ($55/bbl) and RUB68/$will materialize under a significant oil price drop.
The Russian ruble became the best-performing emerging currency as of end-March , overtaking the South African rand in delivering the highest carry trade yield of almost 11%, Bloomberg reported on March 30. So far, ignoring price of Brent oil declining by over 7% in 2017, the ruble continues its rally after the best-ever year in 2016. So far in 2017, the Russian currency gained about 8% against US dollar and about 20% in year-on-year terms.
There is currently a big debate over where the ruble will go in the rest of the year. While the Central Bank of Russia (CBR) believes the currency won’t weaken, Russian Economy Minister Maxim Oreshkin announced on April 18 that the ruble exchange rate will weaken to RUB62-68 to the dollar by the year-end: a level of RUB62 to the dollar will be reached under the current oil price ($55/bbl) and RUB68 to the dollar will appear under a significant oil price drop.
The Kremlin is concerned that a too strong ruble will kill off the nascent growth and has called on the CBR to keep the ruble weaker. Last summer President Vladimir Putin complained that the ruble exchange rate was too strong when it was trading at RUB62.8 against the dollar. In March Finance Minister Anton Siluanov said he believed the ruble was 12% overvalued; it traded at RUB57.4 against the dollar that day, implying the finance minister considers RUB64 as fair value.
Industry leaders have also come out on the best price for the ruble saying they would prefer a rate of about RUB60 to the dollar as ideal balance that would allow them to import expensive foreign equipment but still make good profits on exports.
The Fed comments in April has reignited the so-called carry trade for investors who borrow where interest rates are low to invest in high-yielding currencies. The most obvious investment for this cash is government bonds and Russia’s relatively generous yields make them an ideal vehicle for this carry trade.
Last summer President Vladimir Putin complained that the ruble exchange rate was too strong when it was trading at 62.8 against the US dollar. In March Finance Minister Anton Siluanov said he believed the ruble was 12% overvalued; it traded at 57.4 against the dollar that day, implying the
59 RUSSIA Country Report April 2017 www.intellinews.com