The Russian Ruble keeps on losing value. On June 20, the currency set a new 4-month low against the U.S. Dollar. International experts name a number of reasons for the prolonged downtrend. The list includes Western sanctions against Russia, low oil prices, geopolitics, the Russian economy and balance of payments, and so much more.
After the U.S. Dollar gained 2% against the Russian Ruble on Tuesday in a single trading day, the American currency peaked at 59,77 RUB. Therefore, this has been the strongest level for the dollar and the weakest point for the ruble since February 2017. The Russian Ruble has been devaluing for over a week from the local high of 56,3 RUB. The same story is with the common European currency, which peaked against the Russian Ruble at 66 RUB, which is the highest exchange rate since December 8, 2016.
However, it should be noted that over the last couple of months, the Russian financial authorities have been reiterating the necessity of devaluing the national currency. To be more specific, the Russian Ministry of Finance wants the national currency to reach the average rate of 64,2 RUB per 1 USD for 2017. Also, they expect the Russian Ruble to drop all the way down to 68 RUB per 1 USD by late 2017.
Key Bearish Drivers
Masterforex-V Academy experts report that the Russian balance of payments is getting closer to a deficit. In early 2017, the surplus was pretty high, but this was a seasonal gain. In May 2017, the Russian export was $27 billion bigger than the import. This way, the surplus turned out to be 1,7 times higher than 12 months before.
However, the story seems to be over now. The thing is, the average price of Urals oil produced in Russia was $51,3 per barrel. However, the expected price for the rest of the year is only $45,6 per barrel.
Apart from oil prices, the Russian Rubble has been pressed by the strengthening of the U.S. Dollar in global markets. While dollar assets are getting more attractive for international investors, this starts exerting extra pressure on riskier assets, including Russian ones.
What can abuse the Russian Ruble even more?
Аccording to NordFX experts, the key threat for the Russian national currency, as well as all the assets denominated in this currency, is the new round of anti-Russian sanctions. The Senate has already been working on those new sanctions. The focus is on the possible impact those sanctions may have on the foreign investments in Russian bonds.
If the Senate has really been working in this direction, the negative impact on the Russian economy and financial system may be really serious this time. That is why international experts are now predicting a weaker ruble and weaker Russian stocks, especially amid declining oil prices.
VTB Capital expects that Russian Ruble to lose another 4% to 6% further down the road. The thing is that oil prices now have a lot of downward potential while the upward one is capped. That’s why they expect the Russian Ruble to devalue all the way down to 62 RUB per 1 USD.
