Page 84 - RusRPTApr21

7.0 FX
RUSSIA - FX
2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21
Currency (units per EUR) (eop)
73.4
81.0
79.5
72.9
72.1
71.5
69.8
76.3
78.9
88.7
91.3
90.6
Currency (units per USD) (eop)
62.7
70.0
69.5
64.8
64.3
64.7
63.0
69.3
71.7
75.4
76.5
75.5
Currency (units per EUR) (average)
73.7
76.0
76.1
75.1
72.6
72.0
69.7
73.3
79.5
85.9
90.8
89.6
Currency (units per USD) (average)
61.8
65.5
66.7
66.1
64.6
64.7
62.9
66.5
73.8
73.6
76.2
74.3
source: CBR
The ruble weakened at the end of March on higher political risks. The reaction of the foreign exchange market to growing expectations of imminent sanctions on the Russian ruble government debt was unsurprisingly negative – following increased OFZ sell-off by non-residents, the demand for foreign currency rose, which immediately weakened the ruble exchange rate to the new RUB75-77/$corridor from about 7RUB72-73 earlier in the month.
Arguably, the ruble weakness could have been more pronounced were it not for the quarterly tax payments, accompanied by exporters selling their FX revenue. The ruble weakening peaked in the first half of third week of March. By Thursday-Friday, the ruble regained some ground – at the close of trading on 26 March, the ruble rate was RUB75.66/$(vs RUB74.12/$a week earlier).
The current ruble exchange rate already prices in new sanctions, but not their most severe version. Analysts believe that if Washington introduces a ban on the purchase of new issues of Russian ruble government debt (OFZ), there should not be a major reaction in the ruble exchange rate. However, if the sanctions include a ban on owning all Russian public debt, as well as disconnecting Russia from the SWIFT system, the ruble would again come under heavy pressure. In this case, the rate would approach or exceed the RUB80/$mark.
At the same time, analysts do not rule a scenario of no clarity on sanctions for a long time. Under this scenario, the risk of investing in Russia may return to
84 RUSSIA Country Report April 2021 www.intellinews.com