1. What will happen with the ruble exchange rate?

We forecasted that in September the Central Bank will continue showing that it controls the dollar exchange rate, and it won’t cost more than 25 rubles. As far as control is concerned, we were absolutely right, but the dollar exchange rate was a little bit higher: the month ended with the exchange rate at 25.37 rubles for one dollar.

On September 11 after a meeting with President Medvedev Central Bank head Sergey Ignatyev stated, “The situation in the currency market? The Central bank is in full control of it. We have all necessary levers for it.” He added later, “Within the forthcoming weeks we are not going to expand the limits of the bicurrency basket cost fluctuations. However the ruble’s exchange rate to other currencies may fluctuate.”

As to the dollar’s growth, on September 5, when the dollar increased from 25.17 to 25.47 rubles (simultaneously the U.S. currency’s rate in the world markets went up to its highest index with the year - $1.422 for one euro), Central Bank First Deputy Chairman Alexei Ulyukayev said that the dollar’s going up in Russia is connected with its strengthening in the world currency market. Moreover, “the dollar has every reason to grow, but I can’t predict how long it will last”. As to the Central Bank’s policy under such circumstances, Alexei Ulyukayev said, “For example, yesterday we sold much currency. I won’t give you the exact price; I will only say it was quite a sum.”

All in all, in September the Central Bank managed to counter the dollar’s growth with currency interventions allowing it to increase at the same time. It was explained by the fact that Russia experienced the impact of the world financial trends. More to the point, in August and in September Russian stocks fell in price, and the Bank of Russia didn’t want investors taking their money away from the Russian stock market to buy up those dollars at a too low rate. The central bank also noted that, unlike the stock market, there were no catastrophic developments in the currency market: the ruble didn’t drop that drastically. The Bank also pointed to the fact that it had anticipated the dollar’s growth long before.

Our forecast: Given that the Central Bank regards the dollar’s growth as normal, in October it won’t cost more than 24.9 rubles.

2. What will happen to the prices in Russia?

In our forecast for September we pointed out that regardless of the government’s resolute statements, the inflationary inertia has had quite an impetus, and in September consumer prices growth will be over 0.5%. The forecast was correct: prices increased 0.8% within the month.

Compared with the beginning of the year, prices went 10% up. The International Monetary Fund criticizes the Russian government for their trying to hit two targets at a time – holding back the ruble’s growth and holding back inflation. The Fund’s experts believe that, to maintain the ruble’s exchange rate, the Central Bank buys dollars printing extra rubles. But in September the Central Bank didn’t buy dollars – it sold them – and the IMF had no claims to it.

The official prognosis totals 11.8%, which is slightly lower than the last year’s 11.9%. There are three more months left, and the prognosis’ implementation doesn’t appear probable. However, the government, as usual, can refer to the fact that this year was extraordinary: the global financial crisis was coupled with the global inflation speeding-up. They might say that Russia fell victim to international processes.

Our forecast: Provided that during the September crisis inflation was lower than 1%, it won’t be higher than 1% in October.

3. What will happen with the world oil prices?

In our previous prognosis we stated that investment and pension funds seek to avoid a further decrease in oil prices – in September it would cost more than $110 per barrel, we wrote.

We haven’t made a grave mistake actually. Indeed, investment and pension funds were reluctant to allow oil to get cheap too fast, and on October 1 it went $2 up, exceeding the $100 per barrel mark. The thing that it didn’t manage to reach the $110 mark is quite another matter. Under the circumstances of the global financial crisis investors decided not to invest funds in oil futures considering it another financial instrument they spared for even harder times. But you could not see massive selling out of futures –they are not mortgage securities after all.

Investors have got accustomed to inverse negative relationship between the cot of the American currency and oil futures. When the dollar is on the rise, oil prices fall, and vice versa. Since the dollar grew in the world currency market in September, it appeared natural to stake on oil getting cheaper. Even more so because at the times of a banking crisis and gloomy sentiments in the industry you can hardly expect oil prices to grow.

Our forecast: Since the financial crisis is not over, oil won’t cost more than $105 per barrel in October.

4. What will happen to the dollar exchange rate against the euro?

We anticipated that in September the players in the currency market wouldn’t expect interest rates cuts in the Euro-zone and a fall in oil prices, so the Euro would cost over $1.45. But we underestimated brokers’ sentiments during the crisis – the month ended with the euro costing $1.4.

Regardless of the fact that the world complained about the U.S. mortgage crisis, the dollar was quite strong. It is because the mortgage crisis in other countries was no less hard than that in the United States, and it would have been surprising if the currencies of these countries (including the common currency of the Euro-zone) had begun to grow in price steadily. The U.S. state bonds appeared the most profitable and safe financial tool under the circumstances of the global mess. Investing in oil and gold didn’t seem reliable enough: no one knew how prices would behave. Besides, European financial institutes cut mutual crediting. On the contrary, to demonstrate reliability at the times of the crisis, they decided to pay off their own debts – they were often nominated in dollars, and to carry out this operation, the U.S. currency was needed.

By the end of the month another factor played into the hands of the dollar: there were hopes that the U.S. Congress would finally pass the bailout plan. It was believed that the plan would prove effective and the U.S. financial system would be recovered before other systems could do it. So, the U.S. agenda dominating the world news and everyone’s desire to settle U.S. problems had quite a positive impact on the dollar in September.

Our forecast: Investors and brokers have got accustomed to the fact that the crisis means the strong dollar. So, the euro won’t exceed the $1.44 mark in October.