Page 85 - RusRPTApr21

its previous levels. Absent the turmoil in global markets and shocks in oil prices, the ruble may return to the previous band of RUB73-75/$.
The beginning of the week of March 22 brought a drop in the ruble, which still felt good thanks to expensive oil.
On March 23rd, the exchange rate of the dollar and the euro on the Moscow Exchange for the first time since the beginning of February exceeded 76 rubles and 90 rubles, respectively - both currencies added about 2 rubles in two days. For the first time since August 2020, the Ministry of Finance canceled the auction for the placement of OFZs due to market volatility. Since the beginning of the week, the yield on ten-year OFZs has grown by 18 bp to 7.28% per annum, which is the level of the oil crisis in March 2020.
Almost all the significant factors of what is happening are external, and the ruble as a target does not differ much from the currencies of other developing countries.
Falling oil quotes. Brent crude oil from its peak on March 8 fell by $ 10 - from $ 71 to $ 61, or by 14%. The main factor in the decline is the already officially launched third wave of the pandemic in the main countries of Europe. Investors began to fear that the second consecutive tourist season would be disrupted and the demand for raw materials and fuel would decrease.
Growth in US government bond yields, forcing investors to turn their backs on emerging markets. Having barely approved the $ 1.9 billion injections into the economy, the Joe Biden administration is already thinking of a $ 3 billion infrastructure package, which means the growth of the world's largest economy with accompanying inflation and rising risk-free profitability. Growth in US government bond yields (+80 bp, up to 1.7% per annum since the beginning of the year on 10-year securities) is the main event of the first quarter in the global financial market, said Mikhail Vasilyev, chief analyst at Sovcombank, to VTimes.
The ruble could play an important role in Russia’s economy this year and be a determining factor in performance of inflation. If the FX rate is stable or strengthens, we may see deflationary factors put more influence on the CPI trend. However, if the ruble weakens, the transfer of external inflation onto domestic prices will become more pronounced – in that case the expected significant slowdown of inflation in April may never happen.
The exchange rate has largely decoupled from the oil prices and become hostage to geopolitical risks.
The ruble generally shrugged off the news in March of the MinFin
85 RUSSIA Country Report April 2021 www.intellinews.com