In the baseline scenario (with the Ukrainian and Middle Eastern conflicts unchanged), we expect the ruble to remain strong in November and continue to trade in the established ranges of 78-83 per dollar, 11.6-12.4 per yuan, 88-94 per euro.
The main factors influencing the ruble exchange rate are the dynamics of exports and imports (prices for oil and other raw materials) and the dynamics of capital flows (depending on geopolitics, on the key rate).
In favor of the ruble are:
1) Increased prices for oil and other raw materials due to the escalation in the Middle East.
According to our estimates, the tax price of Russian Urals oil in October is about $103 per barrel after $92 in September and $67 in August. This creates the prerequisites for an increase in export foreign exchange earnings (the supply of foreign currency increases). We estimate the lag between current oil prices and the impact on the ruble exchange rate (the flow of foreign exchange earnings to the domestic market) at about 1.5 months.
Recall that the budget rule compensates for two thirds of the impact of changes in oil prices on the ruble exchange rate. With high oil prices, the Ministry of Finance buys excess currency from the National Welfare Fund.
In the baseline scenario, we believe that the spot price of Brent crude oil in November will trade in a wide range of $110-140 per barrel, while the price of Russian Urals crude oil will be $86-116 per barrel. In the event of further escalation in the Middle East and the Urals rising above $115 per barrel, the ruble may move into the range of 72-77 per dollar, 10.8-11.5 per yuan, 81-87 per euro.
2) A high key rate of 14%, which increases the attractiveness of savings in rubles and restrains demand for imports.
Following the results of the last October meeting, the Bank of Russia maintained its key rate of 14% with moderately harsh rhetoric. At the next meeting on December 18, we also expect the key rate to remain at 14%.
3) The diesel deal between Russia and the United States increases export opportunities and improves the mood of market participants.
The market has hopes for an improvement in relations between Russia and the United States, the conclusion of new deals and the partial lifting of sanctions. Also in November, the resumption of trilateral negotiations between the Russian Federation, the United States and Ukraine on the search for options for resolving the Ukrainian conflict is expected.
If progress is made in the Russia-US bilateral negotiations or in the negotiations on the Ukrainian conflict, the ruble may receive an additional boost to strengthen.
Restraining the strengthening of the ruble: continuing geopolitical and sanctions risks complicating foreign trade calculations and export logistics; disruptions in shipments through the Black Sea ports, which may limit the flow of export earnings; seasonally increased demand for foreign currency to pay for imports, including unscheduled purchases of fuel and components to repair damaged infrastructure; daily purchases of foreign currency by the Ministry of Finance within the framework of the budget rule.
Until November 6, the Ministry of Finance buys currency in the amount of 12.1 billion rubles. We expect that from November 7, the volume of purchases will increase to 17-19 billion rubles per day. This will reflect an increase in export revenue due to increased oil prices.
Mikhail Vasiliev, Chief Analyst at Sovcombank.
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