The dollar: what will happen to the ruble this week

The Russian currency market has again begun the week by strengthening. However, there are currently no significant internal factors to support growth in the ruble.
The ruble on Monday strengthened along with other currencies of developing countries after the release of data on the Chinese economy, analysts at Nordea Bank Tatyana Evdokimova and Grigory Zhirnov say . Additional factors of support for the Russian currency were the comfortable prices for oil and the tax period that began on Monday with the payment of insurance premiums (about 666 billion rubles), they point out.
At the same time, according to analysts at Nordea Bank, the factor of continuing dividend payments by large oil companies is probably neutral for the foreign exchange market due to not too large volumes and mutual compensation of currency sales preceding payments and partial reverse conversion of rubles into currency upon dividend payments .
Also on Wednesday in the US Congress will be held hearings with the participation of special prosecutor Robert Muller on the issue of Russia’s intervention in the presidential elections in the United States in 2016, resulting in the volatility of the Russian currency may increase, according to Evdokimov and Zhirnov. Last Friday, the topic of sanctions returned to the field of view of market participants. This happened after the appearance of information that the US House of Representatives approved an amendment to the US defense budget bill for 2020, which provides for the imposition of sanctions against Russian public debt.
However, for this initiative to be enacted, the budget bill must first be approved by a vote in the House of Representatives, then in the Senate, and then the US President must sign it. Market participants do not yet believe in the implementation of such a scenario, so any reaction from the ruble to these messages is not observed, state in Nordea Bank.
Given the neutral external background and with a predominantly minor statistics on the major economies of the world, the ruble has a chance to gain a foothold at current comfortable levels, consider Evdokimova and Zhirnov.
At the same time, there are no significant internal factors in support of the ruble now, emphasizes the main analyst of Promsvyazbank Mikhail Poddubsky . Now his course is close to equilibrium, based on the current dynamics of oil prices and key macro indicators.
Seasonality of the current account plays already against the ruble, said Poddubsky.
Last week, the Bank of Russia published data on the balance of payments, according to which the inflow of foreign currency into the country on the current account in the second quarter was 12-13 billion dollars, which is less than the figures for the same period last year (17.9 billion dollars), and probably in June, the current account balance was negative. In the coming months, the volume of purchases of currency in the framework of the budget rule may block the inflow of currency into the country on the current account, says Poddubsky.
According to the analyst, the potential for further strengthening of the ruble in the medium term should be considered limited. On the horizon of the next week, it is necessary to focus on the rate of 62.5-64 rubles per dollar, Poddubsky predicts.

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