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MOSCOW, February 26. /ITAR-TASS/. Many acquaintances have asked me over the past month what currency they should convert their savings to - dollars or euros? Tired of watching the incessant fall of the ruble’s exchange rate, they ignored advice from experts who kept reiterating that people should keep their savings in the currency they earn and spend. Besides, buying another currency on the rising market is risky. Lines to currency exchange offices have grown lately. Richer people have begun actively buying real estate.
Nationals have no faith in the national currency, although the authorities say there will be no sharp drop of the ruble. But since the start of the year, the ruble has lost 9.3% against the dollar. The exchange rates of the US and European currencies have already broken all historical records. The official ruble exchange rate today is 35.56 rubles per dollar and 48.86 rubles per euro. Compare: on February 1, 2013, the rate was 29.95 rubles per dollar and 40.70 rubles per euro.
Russian Finance Minister Anton Siluanov tried to calm down the public. “There are no problems,” he said. “The idea is to make the ruble rate flexible so that there would be no artificial control like before.”
One of the reasons why the ruble weakened is a change in the policy of the Russian Central Bank, which last year stopped carrying out targeted currency interventions aimed at supporting the national currency and sometimes extended the boundaries of the exchange rate band. In early 2015, the Central Bank plans to abandon all currency interventions, and the Russian economy will switch over to a flexible exchange rate. The Central Bank will be involved in inflation targeting, which it believes is a more important task for the economy.
“The Central Bank decided to let the ruble float freely at a very unsuitable time. Foreign investors are leaving Russia and are returning to the United States and Europe. This puts pressure on our currency,” Anna Bodrova, a senior analyst with Alpari, commented as quoted by the Kommersant business daily.
“In part, devaluation is good for our economy,” the Komsomolskaya Pravda daily quoted Dmitry Yeliseyev, a deputy director of the Russian Academy of Sciences’ Market Problems Institute, as saying. “For example, exporters will get direct benefit, as they receive revenues in foreign currency and they convert it to rubles. So, the reduction of the ruble rate would positively influence the budget as well, as raw materials companies pay income taxes.”
Nevertheless, the expert said, there is a negative side, too. Russian imports constitute some $300 billion annually. The country mainly buys a huge amount of equipment and consumer goods. So enterprises will have to spend more money on modernization, whereas prices for many goods will grow.
There is an opinion that domestic producers will gain from devaluation as they will compete with foreign brands more successfully. Nevertheless, there are quite few such manufacturers in Russia, the expert emphasized. For example, cars made in Russia are mainly manufactured at assembly plants, with most components (70-90%) imported.
Meanwhile, banks have registered an increased interest in foreign currency both on the part of individuals and companies since the year start. The turnover of foreign currency at cash desks of Russian banks reached 2.2 trillion rubles in January , which is 57% more than in January 2013 (1.4 trillion rubles). Besides, Russians prefer to withdraw their salaries and savings from bank cards in foreign currency - the turnover of foreign currency in cash in ATMs in January grew 16% (3.3 billion rubles).
“A sharp and consecutive growth of exchange rates of the leading currencies turned out psychologically uncomfortable,” the Izvestiya daily quoted Stanislav Savinov, a macroeconomics analyst with UFS Investment Company, as saying. “Turmoil embraced the population in January.”
Another change in the behavior of Russians is explained by an operation that the Central Bank launched last year to clean up the banking market from doubtful and unfair players that caused tens of banks to have their licenses revoked. Citizens started actively transferring money to large banks with state participation or, like in the past, put money “under their pillow”, withdrawing it from bank accounts.
The behavior of wealthy investors has also changed. Investment in real estate seems more reliable against the backdrop of ruble instability and growing risks of license revocation even from large banks. In January, the growth of mortgage loans at the average level of 30-70% was noted by bankers, whereas developers and estate agents registered a sales growth of 20-30%.
There are many forecasts for the ruble’s future, and their range is wide.
“There are no prerequisites for a collapse of the ruble rate that makes people so nervous, in our view,” Deputy Russian Economic Development Minister Andrei Klepach said recently. “There will be a tendency toward a moderate drop of the ruble rate.”
“There is actually nowhere to drop, but the ruble would also hardly strengthen,” Alpari company analyst Anna Bodrova says. “Our forecast for the end of the year: 50 rubles per euro and 36 rubles per dollar.”
“I still believe that consolidation is ahead,” Yulia Tseplyayeva, the director of Russian state savings bank Sberbank’s macroeconomic study center, said. “Our forecast is the same: 33-34 rubles per dollar and 44-45 rubles per euro. All fundamental factors say that," she concluded.
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