The ruble in February: fly with the currency market

estimates of the information-analytical center (IAC) “Alpari”, last January 2020 was for the Russian ruble is highly ambiguous: a powerful strengthening of the dollar and the Euro in the first half of the month amid sharply rising prices for oil and decrease in the second half, especially intensified in the last days of January.

According to Deputy head of IAC “Alpari” Natalia Milchakova, in the end, by the end of January on the foreign exchange market flew “black swans”: the ruble fell against the U.S. dollar by 2.6%, the Euro 1.2%, which became possible mainly due to the outbreak of coronavirus and Chinese fears of slowing economic growth in China.

Now, he said, the news of the coronavirus flow smoothly into the next month, and we should expect that, at least during the first decade of the negativity from China will remain in the headlines and, therefore, the mood on the sale of currencies of developing countries and the flight to safer assets can be preserved.

a Certain negative currency exchange market at the end of January and added the decision of the us fed to keep interest rates in the range of 1.5-1.75 percent. This stimulated the growth of the dollar at the end of the month and stopped the strengthening of the ruble.

Among the important events of the second month of 2020 will not be solutions to the U.S. Federal reserve and the European Central Bank on interest rates, since February the Central Bank will take a break for a month. However, the factors for the strong movements of the Russian ruble in February will still be present, Natalia Milchakova.

Rosstat, in the first days of February, will publish the first estimate of GDP growth of Russia in 2019. Previously, the Ministry published its estimate of GDP growth in 2019, according to which the gross domestic product of Russia grew over the year by 1.4% and the world Bank and the IMF predicted growth of the Russian economy in 2019 at 1.1-1.2%.

If the resulting data will be closer to the Ministry of economic development or exceed it, the ruble can shortbut to grow; if the growth of Russian GDP will not exceed 1.2%, the weakening of the Russian currency may continue, said Natalia Milchakova.

In the middle of the first decade of February Russia is waiting for another portion of important for foreign exchange market statistics Rosstat, namely consumer price inflation for January. Usually in January, inflation in Russia shows the fastest growth in a year. The higher will be the January growth of consumer prices, the greater will be the negative for the ruble, the expert assumes.

on 7 February the Board of Directors of the Bank of Russia will announce this year’s first decision on the interest rate. In 2019, the Bank of Russia took a decision to reduce the key rate five times, and currently the interest rate in Russia is at the level of 6.25%. Factors such as the rate of inflation in January, the dynamics of oil prices and external challenges, for example, the slowdown of China’s economy, will be taken into account by the Central Bank when deciding on the key rate.

Probably, said Natalia Milchakova, in February, the RF Central Bank will leave key rates unchanged; however, it does not exclude that the Central Bank may return to the issue of new lower interest rates if the annual inflation rate falls below 3%. In theory, if the interest rate will remain unchanged, the exchange rate should respond to growth, however, the Russian rouble demonstrates the often paradoxical dynamics.

Among the external challenges and risks for the ruble, the expert of IAC Alpari also notes the spread of coronavirus from China to other countries, slowing growth of the Chinese economy, the new anti-Russian sanctions, if they are extended, and the impeachment of the President of the United States, although the latter is unlikely, and emphasizes Natalia Milchakova.

At the beginning of the 2020 IAC Alpari advised to allocate savings between ruble and US dollar equally or nearly equally. Now the information-analytical center recommends an increase in the share of US dollar or dollarx assets in the portfolio of investments of up to 60%, the rest, as before, continue to keep in rubles.

By the dollar against the ruble in February, the experts IAC Alpari expect 61-64 rubles., the Euro against the ruble — in the range of 67.5-71 RUB.