Vasily Yakimkin: "US Federal Reserve will inflict double blow on ruble"
The US Federal Reserve will hold a meeting this evening, during which, as expected by the vast majority of analysts, its interest rate by 0.25%, to 0.75%-1%, which will lead to technical price increase of the dollar compared to other currencies. Ahead of Fed interest rate announcement, associate professor of the Stock Markets and Financial Engineering Department of the RANEPA, Vasily Yakimkin, discussed the impact of this event on the international financial market and on the ruble in an interview with Vestnik Kavkaza.
- How will the dollar's position change after expected raise?
- Markets already expect that the Federal Reserve is going to raise its interest rate by 0.25%. Although it will support the dollar, the expectations themselves have already affected the current price. The emerging markets' currencies will be under pressure. Head of the Federal Reserve System Janet Yellen's speech will be even more important: if her tone will be more aggressive, "hawkish", the dollar will continue to grow, and the ruble will get weaker; if her tone will be more calm, it's possible that the ruble may even raise against the US currency.
- How will Fed's decision affter oil quotes?
- The dollar price will raise against the commodities market, in particular, oil price in dollars will decrease for obvious reasons. In this regard, the growth of Federal Reserve's interest rate will inflict a double blow on Russia: on the one hand, the emerging markets' currencies are getting cheaper against the dollar, on the other hand, oil is also getting cheaper, which puts additional pressure on the ruble. So in the end the ruble will likely be under huge pressure.
- How much weaker will the ruble become?
- It should be understood that right now the ruble is in a great state, and at worst, Janet Yellen's "hawkish" comments can weaken it to 60 rubles for 1 dollar. At the same time, Western players will immediately play in favor of the ruble, in particular in the debt market, buying Russia's federal loan bonds, which will support the ruble. Most likely, the dollar will jump higher than 60 rubles, and then quickly roll back down.
- In your opinion, why foreign speculators are so interested in the Russian currency?
- Western investors still must earn money on something. Right now they don't have reliable instruments. There's a confusion in the European markets, risks are much higher. That's why many investors prefer to buy Russian bonds, rather than European ones, because of high risks and extremely low profitability of the latter. Russian bonds at least give more income.
- Is it possible that the interest rate will remain the same?
- It's an unlikely scenario. At the same time, I would like to note once again, Janet Yellen's comments will be very important. If she hints that the interest rate will be raised in May, the ruble will preserve current dynamics, if it will happen in June, then the ruble will be strengthened. There will be a chance that Russian currency will stay at the level below 59 rubles for 1 dollar. Oil prices may also jump and stay above 51 dollars per barrel.