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68 to the dollar: the Ruble into a steep dive

August 13 in early trading on the Moscow exchange, the dollar rushed up to the mark 68,66 RUB/$. This is the maximum since April 18, 2016, and nearly 1 ruble higher closing session on Friday. As a result, for four days the growth of the American currency has risen more than 5 rubles.

The Euro has reached a point 78,15 RUB/€, the high from April 2018.

Analysts believe that the dollar soared purely on geopolitical risks. As evidence, they compare the situation with the March. Oil was then $ 70-71, and the dollar remained in the range of 57-57,5 rubles/$. Now oil is about the same, but the situation has changed with the anti-Russian sanctions.

In March stringent restrictive measures, as they say, did not smell. Now, on the contrary, everyone is waiting for that August 22 will come into force on the first package of new sanctions announced by the White house. On the approach of the “Act for the protection of American security from the aggression of the Kremlin in 2018,” prepared by Republican Lindsey Graham and three of his colleagues.

In the economic part of the draft law is the most important requirement of a prohibition on operations in the United States (and the freezing of assets) of seven Russian banks, including Sberbank, VTB, VEB and PSB. In addition, the text contains the actual ban on operations with Russian debt with a maturity of more than two weeks — but only with new releases.

“Act” has not yet been adopted, and may be commuted. But foreign holders of Russian OFZ thought it best to get rid of the debt securities. As a result, in the beginning of the day OFZs fell by 0.1−0.6% of the nominal value, and their yield reached 8.3% per annum.

Presumably, bearish stock market game will continue. And not only because of the pressure of the American authorities on Russia. The ruble continues to lose ground even against a background of overall growth of the US dollar in the world.

According to Reuters, in the course of trading on August 10 DXY index (dollar relative to six currencies) for the first time since July 2017 rose above the level of 96. Hardest hit emerging-market currencies — Turkish Lira, South African Rand, Hungarian Forint.

The collapse of world currencies against the U.S. dollar, according to analysts, triggered by fears the European Central Bank (ECB) due to falling of Turkish Lira. The regulator considers that a number of major European banks, the Spanish BBVA, Italian UniCredit and French BNP Paribas, are at risk. All of them are in Turkey, a major operation, meanwhile, Turkish borrowers can start to declare a default on loans in foreign currency, which accounted for 40% of banking sector assets in Turkey.

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Nervousness traders added the US President Donald trump. On August 10 he stated that the sanctioned twice to raise taxes on aluminum and steel from Turkey — up to 20% and 50% respectively. That is, given to understand what to expect mercy from Washington is not necessary — neither the Turks nor the Russians.

Any marks in this situation can fall the ruble?

— The ruble forced to pay a geopolitical prize, and to the sanctions subjects is added, the situation in emerging markets, — said the head of a direction “Finance and Economics” Institute of contemporary development Nikita Maslennikov. — On 10 August began a steep drop in the Turkish Lira — the day she lost 15%, and continues to move down. But the falling ruble is starting to catch up to South African Rand and Brazilian real. In General, the situation in emerging markets is fragile and unstable.

A trade war with China, almost doubling U.S. duties on steel and aluminium from Turkey — all destabilizie global financial market, and creates additional preconditions for the weakening of the ruble.

This instability will persist, in my opinion, in a few weeks. Perhaps several months. All this time, there is a risk that financial markets may rapidly adjust down and it will give additional speed to the process of weakening of the ruble.

“SP”: — Will the Bank of Russia to intervene in the situation and to align the course?

9 Aug CBR is not present in the foreign exchange market, and lead buying foreign currency. And there is a suspicion that it will last until August 17. However, the rouble even in such a situation played a part 13 of the August drop, the exchange rate fell slightly below 68 rubles to the dollar.

Overall, there is a feeling that by the end of the trading week the ruble will go out in the hallway 65-67 per dollar. And last in this range to 22-23 August, when the U.S. Treasury to unveil new sanctions.

“SP”: — These sanctions will collapse of the Russian currency?

— The United States can impose a range of sanctions, from extremely painful to the symbolic. On what options they will stop, is difficult to say. However, the probability of large-scale sanctions on the public debt of the Russian Federation today is evaluated as low — it is about 15%.

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In principle, the potential weakening of the ruble remains. But if the sanctions of the White house will be quite moderate, the markets could at them and not respond. Just because a game against the ruble have been played — as the speculators, on an untested event. If you now checked the event will be below expectations, the markets did not notice him. If the above expectations, further weakening of the ruble is possible, but the probability is not higher than 50%.

Here it is necessary to understand perioralna dollar America is not at hand. Because this worsens the already very scarce, the trade balance of the United States, and could be used by China and the EU to Washington’s accusations regarding the currency manipulation.

According to financial logic, the US should refrain from drastic action, including against Russia. But the logic of political Americans can be completely different. And she will let you know closer to September, when the vacation of Congress, and will begin preparing for the November elections for all 435 members of the house of representatives and 33 of 100 U.S. senators.

“SP”: — How it may be cheaper ruble in the most catastrophic scenarios?

— About 15% – if implemented, all of the current senatorial provisions of the “Act for the protection of American security from the aggression of the Kremlin 2018”, which is highly unlikely. Yes, the risks of weakening of the ruble. But the reason for massive panic — to immediately run out and buy the currency — I do not see.

There is also the factor of oil. USA, apparently, will still go for tougher sanctions against Iran — and this will inevitably push oil prices to increase. And rising oil prices, of course, will always be to support the ruble. According to the forecasts of the fifth part of the expert community, the price of a barrel by the end of the year will amount to more than $ 75.

However, other experts believe that a trade war US-China will lead to a hard landing of China’s economy in the fourth quarter of 2018. As a result, the demand for oil will fall and the price of “black gold” will fly to $ 60 per barrel. But it will mean the creeping global economy in the global crisis. And will trump such a scenario remains an open question.

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