Ruble meets May Day with confidence
The Russian ruble is receiving new sources of support for its course ahead of the upcoming May Day celebrations, experts predict.
The main source of the support is the ongoing tax period, when Russian companies are interested in accumulating funds in the local currency.
The fact that trading volumes are reduced on the eve of the holidays will also play its role.
"Besides the holidays and the taxes, large Russian companies are closing their shareholder registers.
This will also affect the market. It is hard to say in which direction, up or down. I believe that this factor can influence the strengthening of the ruble, but it is a secondary reason," Rossiyskaya Gazeta cited a professor at the Finance University of the Russian government, Boris Heifetz.
It should be noted that today oil prices went slightly down. The price of a barrel of Brent crude dropped 1.13%, reaching $44.56. WTI oil prices dropped by 1.44% to $43.1.
As of 10:39 Moscow time, the dollar increased by 0.27 rubles and now stands at 66.73 rubles on the Moscow stock exchange. The euro rose 0.36 rubles and reached 75.09 rubles.
An Associate Professor of the Stock Markets and Financial Engineering department of the Faculty of Finance and Banking of RANEPA, Sergey Hestanov, speaking with a correspondent of Vestnik Kavkaza stressed that the impact of any of these factors on the ruble exchange rate depends on a situation on the foreign exchange market and a state of the Russian economy. "Therefore, in quiet times, when there are no geopolitical factors and oil prices are stable enough, exporters are forced to buy rubles during the tax period to pay taxes, supporting the ruble exchange rate. However, now the impact of both the political factors and the dynamics of oil prices is noticeably stronger than the effect of the tax period. Therefore, the big question is whether the seasonal factor will be able to support the ruble exchange rate this year," he expressed doubt.
"As for the low trading volumes, they facilitate a shift in prices in case of major purchases or sales. In those days, when trading volumes are small, the probability of strong price fluctuations is higher. There is no guarantee that it will happen, but all things being equal, the probability of any sudden rate hikes is higher. The closing of shareholder registers is an absolutely neutral event, because the payment of dividends takes several months, sometimes even over six months. This factor alone can drive the exchange rate neither up nor down nor decrease it," Hestanov believes.
He also warned that at the moment we shouldn't talk about a period of stability for the ruble. "On the one hand, there remains a significant budget deficit of about 5%, but on the other hand, it is too early to talk about any stabilization at the oil market. Therefore, I think the current calm does not mean that this situation will last for a long time," the expert noted.
An associate professor of Stock Markets and Financial Engineering of RANEPA, Vasiliy Yakimkin, pointed out that the tax period will be over on Thursday, so we may count on the support of the ruble only until that date. "If the oil price seriously drops, then no taxable period will help the ruble. I think the ruble will become more volatile this week, as many central banks around the world are holding their meetings. The results of these meetings will affect the dynamics of the dollar against a wide range of currencies, including the ruble. The Russian Central Bank will hold a meeting on April 29 and, despite the fact that Elvira Nabiullina said the key rate will not be changed, it is likely that the rate will be reduced by 50 basis points, which will put pressure on the ruble," he said.
"In this regard, some traders will bet on the ruble staying at the current level, and some on its weakening. Therefore, the ruble volatility will increase, as well as the currency volatility in different regions of the world. The markets will be turbulent this week. Any turbulence puts risky assets under additional pressure. I think next week we should try to play for a fall of the ruble in the short term," Vasiliy Yakimkin suggests.
"The ruble does not enter the period of stability now. Its volatility is still high, which is why Nabiullina does not want to reduce the key interest rate. If the rate is reduced, the ruble will show abnormally high price changes throughout the day," the analyst concluded.