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Dollar expected to hover at around 62-64 rubles in 1H 2020, say experts

Analysts at Rosbank expect the dollar’s exchange rate at around 63 rubles in the first quarter of 2020

MOSCOW, December 27. /TASS/. The dollar’s exchange rate will stand at 62-64 rubles per dollar in the first half of 2020, experts polled by TASS suggest. However, in the second half of next year the Russian currency may weaken to 66-70 rubles.

Most analysts interviewed by TASS expect the dollar’s exchange rate to be in the range of 62-64 rubles by the middle of 2020. They warn though that the prospects of the second half of the year look weaker for the ruble than those of the first half as the national currency may drop to 66-70 rubles per dollar by the end of 2020 amid the global economic environment.

Experts expect the ruble to strengthen in 1H 2020

"Due to the US Federal Reserve's pivot to easier monetary policy and infusion of considerable amounts of liquidity into the markets hot money of large funds, which broadened both high-risk and debt instruments ceilings, flew to emerging markets at the beginning of 2019, which contributed to strengthening of the ruble’s exchange rate," Finam’s analyst Sergei Drozdov said.

Currently the ruble is quite comfortable within the range of 62.15-63 rubles per dollar thanks to favorable environment on global financial and commodity markets, the expert said, adding that if the current trends on global stock markets persist in the first quarter of next year the Russian currency can breach the level of 61 rubles.

Analysts at Rosbank expect the dollar’s exchange rate at around 63 rubles in the first quarter of 2020, which they suggest will be backed by a decrease in capital outflow from the country - from $35 bln in 2019 to $20 bln in 2020 projected by the Central Bank. Moreover, the easing of the regulator’s monetary policy and improvement of the geopolitical background will strengthen the currency as well, they noted.

Alfa-Bank’s Chief Economist Natalia Orlova shares the view that the ruble will be within the 62-64 rubles per dollar range in early 2020. Citi’s economist in Russia, Kazakhstan and Ukraine Artyom Zaigrin projects the dollar’s exchange rate closer to 64 rubles at the beginning of next year.

Meanwhile, Alfa Capital’s Vladimir Bragin believes that the dollar will stay at the level of 62 rubles by the end of 2020 as well.

"The ruble’s exchange rate has behaved approximately as other emerging currencies since the beginning of 2017 when the fiscal rule was enforced. It is affected by approximately the same factors, including external news background, which means news connected with sanctions, inflation risks, which trigger serious changes in the Central Bank’s key rate and investors’ expectations concerning debt instruments’ yields, as well as macroeconomic risks. On all those dimensions the conditions for the ruble remain favorable in 2020," he explained.

2H 2020 may be less positive for the ruble

Experts interviewed by TASS pointed out several constraining factors for the currency, which mainly are connected with the international background. Among them are the state of the global economy, long-term oil outlook changes, Russia’s relations with other countries, including sanctions-related issues. The negative influence of those factors on the country’s economy will emerge primarily in the second half of next year, they suggest.

Particularly, Alfa-Bank’s Natalia Orlova believes that the ruble will weaken to 65-70 rubles per dollar in the second half of the year due to the US presidential election. "The market will be oversensitive to the US electoral agenda in the second half of the year as the relations with Russia, the risks of more sanctions, the prospects of the Russian markets overall all depend on whether (the current US president) Donald Trump will be reelected," she noted.

Meanwhile, Rosbank’s analysts are concerned about the downgrade of the Brent crude oil outlook for 2020 to $55-60 per barrel by analysts of SG Securities due to potential consequences for the current account surplus, which can also go down to $67 bln in 2020 from $75 bln in 2019. "The ruble can take the brunt in a situation like that adjusting to 66.5 rubles per the US dollar by the end of Q4 2020," they explained.

BCS Premier expects the Russian currency to weaken up to 68-75 rubles per dollar next year in case external risks materialize.

"The main risks for the ruble and the Russian market in general persist regarding potential capital outflows from emerging markets. The risks of foreign investors’ withdrawing from the Russian market may intensify both in case of escalation of the US-China trade dispute and if, for example, geopolitical risks in the Latin American region strengthen," the company’s financial analyst Sergei Deineka said. Veles Capital’s Yuri Kravchenko projects the range of the dollar's exchange rate against the ruble at around 60-65 rubles by the end of 2020.