The ruble fell without the support of Russian exporters

(Citations updated, text changes made, commentary from Raiffeisenbank analysts added)

MOSCOW, May 15 (Reuters) – The ruble fell sharply on Monday amid lower sales of export proceeds for dividend payments, in large part as the Russian currency hit local highs last week.

The ruble may be countered by new threats of sanctions, as well as macroeconomic indicators reflecting the declining current account surplus and the increase in the federal budget deficit of the Russian Federation.

At 17:30 Moscow time, the dollar/ruble was at 79.45 with “for tomorrow” calculations, and the ruble is losing almost 2%.

The euro/ruble pair is trading close to 86.54, and here the ruble loses 2%.

“Offers (from exporters) plus an increase in geopolitical tensions – in this respect, the dollar could reach $80 pre-tax at the end of the month, but it is unlikely to rise,” said a dealer of one major Russian bank.

“Given the increased uncertainty caused by temporary factors, we estimate that a reasonable range for the ruble exchange rate in the coming months is quite wide – 75-80 to the dollar,” Raiffeisenbank analysts predict.

Combined with the yuan, the ruble fell 2.4% to 11.39 on Monday evening. Here, the demand of Russian importers for the Chinese currency also plays a negative role.

According to preliminary data from the Central Bank of Russia, the surplus on the current account of the balance of payments of the Russian Federation in January-April 2023 amounted to USD 22.6 billion and decreased by 76.6% compared to the corresponding period of 2022.

This statistic is superimposed on data published last Wednesday by the Russian Ministry of Finance of the Russian Federation regarding the increase in the federal budget deficit of the Russian Federation in the first four months of 2023 to 3.42 trillion rubles, which exceeds the annual plan by 17%.

Egor Zilnikov from Promsvyazbank cited the increased rhetoric of sanctions as one of the reasons for the current weakness of the ruble.

Over the weekend, the Financial Times reported that the G7 (G7) countries and the European Union, as part of the 11th package of sanctions, may ban the supply of Russian pipeline gas along routes through which Moscow previously restricted exports.

“The excessive appreciation of the ruble seen in recent weeks is being corrected as investors seek a balance point,” said Vladislav Silaev of Alfa Capital.

From early May to mid-last week, the local market was dominated by non-speculative foreign currency sales, which market participants associated with the forthcoming payment of ruble dividends by export corporations. As a result, the ruble reached local highs last Wednesday: a 2-month high against the dollar (75.23) and a 2.5-month high against the yuan (10.81).

On the outer contour against the Russian currency, with no local support for exporters, key grades fall to 10-day lows, $73.49 a barrel Brent and $69.41 a barrel WTI (currently both brands are trading in positive territory) could play.

The US dollar hit a five-week high of $1.0843 against the euro, and a five-week high against a basket of six key currencies at 102.75, but then fell into negative territory. Current quotes are $1.0869 and $102.52 respectively.

The dollar reached local highs amid the risk of a continuation of the Fed’s rate hike cycle (instead of a long break in the monetary policy tightening cycle) after Friday’s data on a jump in long-term inflation expectations of US consumers.

Friday’s speech by Fed chairman Jerome Powell will be important for the forex market this week. ECB President Christine Lagarde is also scheduled to speak on Friday and Tuesday.

The possible meeting tomorrow between US President Joe Biden and US lawmakers to negotiate an increase in the permissible amount of public debt is also in the spotlight. (Moscow office)