Friday, October 23, 2009

Strengthening of the ruble could become a problem

Financial Analyst FxPro Alexander Kuptsikevich: Today, the dollar fell below a mark of 29 rubles. The reason for this building served as the weakening U.S. currency, as well as skyrocketing oil prices to $ 81. Strengthening of the ruble could become a significant problem for the restoration of Russia's economy, and the authorities know about it.

A little over a year has passed since the Central Bank has used an arsenal of non-standard methods to support the ruble and a bailout of the banking system with smaller losses. In October, the Central Bank once again become actively replenish gold reserves to prevent excessive strengthening of the ruble. However, monetary authorities seem unable to take action to influence the market movement. Thus, following the decline of the dollar, which is clearly in favor of the States, and rising oil prices, domestic currency becomes more expensive.

Encourage the reduction of the ruble may be three factors:

Short-term, seasonal - often stops ruble strengthened after the 20's numbers before the end of the month, which is associated with the period of tax payments.

Short-term, foreign - as an adjustment to the growth sites. Already we see how willing investors are to get rid of the shares on bad data. They later redeemed, but short-term speculators clearly record profits before the publication of data on the level of U.S. GDP in the third quarter, which will be next week.

Long - Oil prices are unlikely to show an equally impressive dynamics due to high unemployment in the world, greater caution by financial institutions to use leverage, as well as banal impossibility increase export of petroleum products, that is, the further growth of revenues is limited.

As a result, a higher inflation rate in comparison with developed countries would put pressure on the ruble, but a very moderate pace of recovery in economic activity because of falling costs and a slowdown in lending may reinforce this trend. As a result, year-end pair dollar / ruble might revisit the region above 30, and next week "seasonal" decline in interest in the ruble may discard a pair of 29,10.

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