Page 84 - RusRPTNov21

7.0 FX
RUSSIA -FX
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
Oct21
Currency (units per EUR) (eop)
72.1
71.5
69.8
76.3
78.9
88.7
91.3
90.6
88.8
86.4
82.0
Currency (units per USD) (eop)
64.3
64.7
63.0
69.3
71.7
75.4
76.5
75.5
73.8
73.4
70.9
Currency (units per EUR) (average)
72.6
72.0
69.7
73.3
79.5
85.9
90.8
89.6
89.4
86.4
82.7
Currency (units per USD) (average)
64.6
64.7
62.9
66.5
73.8
73.6
76.2
74.3
74.2
73.0
71.3
source: CBR
The ruble has appreciated vs. the US dollar due to higher commodity prices (especially non-oil commodities) and topped RUB70 to the dollar at the end of October – a level it was not expected to reach until the end of the year. Higher gas prices and the seasonality of volumes should support the ruble in 4Q21.
The new schedule for FX purchases for MinFin’s reserves for October, shows a lag in buying from the oil prices moves: Starting from 7 October, the CBR started to buy RUB15.1bn worth of foreign currency daily for the MinFin, or 1.3% more than in September, despite the fact that oil prices rose by 12.3% over the past month.
As a result, after a 3-month break in the Russian FX market, we saw investors returning to the carry trade strategy: Accelerating inflation and higher oil prices, together with stronger expectations of a rate hike and lower FX purchases, fueled investments in the ruble.
In the second week of October, the ruble rate dropped below the Rb72/$handle for the first time since July 2020, while the ruble liquidity surplus in the banking system again noticeably increased.
At the close of trading on 8 October, the FX rate against the US dollar was at RUB71.88/$ (v RUB72.73/$a week earlier, on 1 October).
Despite the recent spike in oil and gas prices, Russia will limit mandatory FX purchases to $4.4b, slightly below September's level, and significantly lower than the $9-10b monthly current account surplus that is to be expected for 4Q21 given current commodity prices. This should provide some reinforcement for the ruble vs its emerging market peers, ING said a note.
The Russian Finance Ministry announced on October 5 that monthly FX
84 RUSSIA Country Report November 2021 www.intellinews.com