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Experts: ruble appreciation set to become steady trend

March 25, 2015, 16:01 UTC+3 Zamyatina Tamara
© Vladimir Smirnov/TASS

MOSCOW, March 25. /TASS/. The ruble’s appreciation observed lately has all the grounds to become a steady trend as the Russian currency is currently clearly undervalued, experts polled by TASS said on Wednesday.

The US dollar fell to 58.23 rubles on Tuesday while the euro was trading at 63.87 rubles, the lowest levels in the past two months.

The Russian currency has strengthened by more than 13% against the dollar and the euro since the start of 2015, Finance Minister Anton Siluanov said.

The Russian currency has pared most of its losses since mid-December 2014 when it fell to a record low of 80 rubles to the dollar and 100 rubles to the euro.

The Russian economy is recovering despite western sanctions while the ruble has been less volatile than any of the world’s 30 major currencies this year, Bloomberg analysts say.

"The rising oil prices are producing traditional positive influence on the ruble. Oil is currently trading at $55-56 per barrel whereas several days ago the oil price was seen to fall almost to $53," Vnesheconombank Strategic Analysis and Development Department Director Vladimir Andrianov told TASS.

"Russia’s financial authorities have pegged the ruble rate to the oil price, although they have no direct relationship. In other countries where raw material sectors account for a substantial part of budget revenues, there is no such a close relationship between the oil price and the national currency’s exchange rate," the expert said.

"I believe the ruble is currently undervalued and its appreciation will continue and is likely to become a steady trend. The Russian currency collapsed in December because the Central Bank deliberately moved to devalue the ruble mildly for the purpose of the economy’s recovery. But the interference of speculators made this process uncontrolled. Now the situation is improving," he added.

"A major cause for the ruble’s current appreciation is that large Russian companies have passed their peak of foreign debt payments in the amount of about $65 billion," Andrianov said.

"Now big business does not need foreign currency in the previous volume. Major tax payments in Russia are made in March and April. Large taxpayers need to set aside the national currency and sell dollars and euros, which will also facilitate the ruble’s strengthening," the expert said.

The ruble’s almost 50% devaluation at the end of last year was not justified either by the fall in oil prices or anti-Russian sanctions, Russian Banks’ Association President Garegin Tosunyan told TASS.

"It was provoked by the hysteria on the financial market. Negative expectations tend to materialize and this is what we were confronted with in Russia. I have always been against negative commentaries, which I compare to hysterics. Now the market has calmed down and the ruble is restoring its positions in a natural manner," the expert said.

"Yes, indeed, the country is living through stagflation and an economic decline but this is not a cause for starting to panic and rushing to buy foreign currency, thus deteriorating the financial market situation. The positive trend of the ruble’s appreciation should be maintained. This should be a long-term program rather than a short-lived campaign. Institutional reforms are needed in the economy and business should be stimulated to develop import-substituting production. In this case, the undervalued ruble will continue its growth and I hope it will continue for long," the banker said.

"The shot-term factor of the ruble’s strengthening, namely, tax payments, will be exhausted soon and the ruble will slow down its growth against the dollar and the euro," Deutsche Bank Chief Economist in Russia Yaroslav Lisovolik told TASS.

"However, the clearly undervalued Russian currency has the appreciation potential, which has not been fully realized yet. I expect the rate of 55 rubles to the dollar to be a fair level for the current state of the market until the end of this year," the expert said.

TASS may not share the opinions of its contributors