U.S. dollar weakening predicted
The U.S. dollar exchange rate against a basket of major currencies may drop by 6% by the end of 2019, according to Morgan Stanley experts. They expect the U.S. currency will depreciate because of the U.S .economic slowdown and the Federal Reserve's decision to stop raising interest rates.
The bank believes that "the dollar has peaked in the current cycle" and "will drop lower than the market expects." "In addition, the global stocks forecast is generally better than the U.S. stocks forecast," Interfax cited Morgan Stanley experts as saying. It will also "reduce U.S. investors cash flow repatriated to their homeland," the bank analysts pointed out.
Other financial companies, including Goldman Sachs and Western Asset Management also forecast the dollar will depreciate this year.
The advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, speaking to Vestnik Kavkaza, noted that even if the dollar weakens dramatically by the end of the year, it will have little effect on the ruble exchange rate. "The fact is that a significant amount of Russian exports is dollar-denominated, but, at the same time, almost all federal budget expenditures are ruble-denominated. Accordingly, it’s the oil price that is more important for the Russian ruble, not the performance of the dollar against a basket of other currencies," he explained.
"If oil prices grow by the end of the year, then, most likely, we will see a strengthening of the ruble. And vice versa, if oil price drops dramatically, the ruble is likely to weaken," Sergey Hestanov added.
Professor of the RANEPA faculty of Finance, Money Circulation and Credit, Yuri Yudenkov, agreed with Hestanov. "The prospect of a decline in the dollar rate against a basket of major currencies by 6% is very high due to the current U.S. policy in the market of goods and services. But it does not mean that the ruble will strengthen. We sell raw materials mostly for dollars . If the United States really blocks the accounts of leading Russian banks in U.S. banks, it is very difficult to predict what will happen with the exchange rate of the dollar to the ruble. All other currencies will have to be converted into something else, and this will sharply increase operating expenses," he explained.
"Russia will not benefit from the fact that the dollar rate will decline against other currencies. Everything is much more complicated. The ruble exchange rate will depend on the Central Bank's actions, the Ministry of Finance's policy and many other factors: Europe does not refuse sanctions and does not credit Russia banks in euros, while China does not lend in yuan, because it is also afraid of U.S. sanctions. Now there is a temporary lull, and the ruble is still stable compared with all currencies of developing countries. It may last for several days, weeks or months, but I would not claim that the ruble is very stable," Yuri Yudenkov concluded.