Ruble strengthens after Federal Reserve decision

Ruble strengthens after Federal Reserve decision

BY CATHERINE MEREMINSKAYA : Екатерина Мереминская

Gazeta.ru financial correspondent Catherine Mereminskaya

Source:  Ставки нет и не будет

Photo:  Sergey Kon’kov / TASS

Translation

Russian financial analysts expectations for likelihood of upward momentum of the ruble in the foreign exchange market.

Moscow – March 19 – Ruble strengthens against the dollar and euro after rate decision by the U.S. Federal Reserve Bank.. The rate already below 60 rubles ./$ 1 euro also dipped below 64 rubles. / € 1 .

The first time since December.

Gazeta.ru quired financial analysts about the  likelihood of the ruble gaining positive momentum from America’s Federal Reserve decision on rates.  

“The dollar is worth below 60 rubles. In the international bidding and it dropped against the euro – from $ 1.05 to $ 1.1.

Stock indexes advanced MICEX – by 0.5%, RTS – 2%. This is the market reaction to the Federal Reserve decision on the basic interest rate.

The U.S. regulator once again kept   it’s key interest rate at a record low of 0-0.25% per annum.  Analysts had expected and the marke also contrary to the predictions, rejected the possibility of a rate hike at the next meeting on April 28-29.

An April rate increase, according to the final statement by the Federal Reserve “is unlikely.”

At this level, the controller keeps the rate has been more than six years – from December 2008. Judging by the new forecasts from the Fed (GDP forecast downgraded from 2.6-3 to 2.3-2.7%, inflation – from 1.6-1.9 to 1-1.6%).

The rate increase should be wait until the end of September.From the standard formulation disappeared promise of “patience” in relation to rates. But it is stressed the Fed chief Janet Yellen, “does not mean that we are impatient.”

The market was encouraged by the news.

US stock indexes are reduced by 0.5%, pending a decision, completed trades significant growth: the broad market index S & P 500 added 1.2%, the index of the traditional economy Dow Jones – 1,3%, high-tech NASDAQ – 0,9%. Asian shares rise in price on Thursday by an average

Ruble reaction

The dollar reacted by falling against the ruble. The U.S. auction rate  fell immediately by 2.5% to $ 1.1 for € 1.

In recent years, the dollar against the euro rose in price just because forecasts increase the base rate in the United States and the beginning of stimulus measures in the eurozone.

The base rate of the European Central Bank (ECB) is also a record low – 0.05%.

According to forecasts, the growth of the interest rate differential is in favor of the dollar. Since mid-2014, when the Fed started talking seriously about a possible rate increase, the index

The Bloomberg Dollar Spot Index, reflecting the movements of the dollar relative to the ten major world currencies, increased by 18%.

These expectations in January led to a record outflow of capital from Europe. «€ 200-300 billion in December – January, according to our calculations.

This capital outflow was due to expectations, not some real processes “- believes the chief expert at the Center for Economic Forecasting  Gazprombank Yegor Susin.

Western analysts believe that this and sought to control. “The Fed realizes that the strengthening of the dollar – this is a serious tightening of the US economy – says a professor at Johns Hopkins University in Baltimore and a former Fed economist Jonathan Wright, his quotes Bloomberg.

Fed worried about what will happen to the dollar and financial markets, if it starts to tighten policy at a time when much of the rest of the world weakens the policy and reduce interest rates. “

“Concerns about the sustainability of growth in the US economy have also supported the” risk appetite “in global markets, which resulted in a rebound in the euro / dollar, the price of Brent crude oil prices and growth in market share.

Sharp fluctuations in these trading platforms explained short covering players who were expecting a tougher rhetoric from the Fed, “- says the head of analytical department of IC Russ-Invest Dmitry Bedenkov.

In Russia at the end of trading Wednesday the dollar fell by 2 rubles. and entrenched below 60 rubles ./$ 1 – at 59.3350 rubles ./$ 1.

On Thursday, the rate dropped to 1.5 rubles. relative to the current official and a 11.30 average exchange rate was 59.83 rubles ./$ 1 – this will be the official rate of the Central Bank on Friday.

The euro exchange rate in the course of trading for the first time in December 2014 fell below 64 rubles. / € 1.

“In the medium term, I expect that the course will be in the range of 55-60 rubles ./$ 1. This will be kept very high volatility, “- says Yegor Susin.

A significant change in the dollar exchange rate, however, he does not expect either in Russia or in the international market.

“The statement the Fed adjusts rather inadequate market expectations about the euro and the prospects of Fed tightening,” – said the expert Gazprombank.

“Last month, the ruble is kept in the hallway 59,4-62,5 rub. per dollar.

Short term forecast

If the Fed news ruble be able to stay at the level of 59, it is quite possible that he was in the next week or two will go into a new corridor – 54,5-57,5 “- said the deputy president – Treasurer Bank settlements and savings Igor Dmitriev.

The remaining experts are less optimistic and believe that the Fed plays a small role in the movement of the pair at the auction on the Moscow Stock Exchange.

“Of fundamental importance to the exchange rate given the Fed’s decision will not,” – said Bedenkov.

“A couple of the ruble / dollar is now the main influence coming tax period in Russia, forcing exporters to sell foreign exchange earnings and accumulate rubles for further payments to the budget.

As a result, even a strong downward movement in the price of Brent crude oil has not yet priced in rubles, “- said analyst UK Alfa Capital Andrew Schenck.

“Prospects for a pair of dollar / ruble will continue to depend on the situation in commodity markets and the sanctions pressure from the West,” – says Sergey Kozlovsky, head of the analytical department of Grand Capital.