In time of never-ending instability on financial market, the analysts spotted a stronghold, the Russian ruble, forecasting its rate to bi-currency market of ˆ0.45 + $0.55 to stand still at least till this year-end and expecting the trend to survive next year.
Photo: Alexander Miridonov
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Looking for a Stronghold
In time of never-ending instability on financial markets, the analysts spotted a stronghold, the Russian ruble, forecasting its rate to bi-currency market of ˆ0.45 + $0.55 to stand still at least till this year-end and expecting the trend to survive next year.
One of the reasons of strong-ruble expectations is the recent toughening of credit and monetary policy in Russia, first of all, the slowdown of M2 growth in the third quarter, which, the analysts say, will bring fruit only at the end of 2007 or in early 2008.
Of interest is that quite a number of investment banks didn’t doubt the ruble stability in October. The physiologically vital decline of the ruble-to-dollar rate is expected to continue this year. The rate will be roughly 24.6 ruble/$, if a euro costs $1.45 and sink to 24.2 ruble/$ with the euro price of $1.5.
At the same time, the M2 reduction occurred not because of aggressive policy of the Central Bank of Russia. The true reason was the capital outflow due to the global liquidity problems generated by the subprime mortgage crisis. So, the key issue that will allow to forecast any growth in the ruble rate is the extent of the capital inflow to Russia posted from October to this year-end.
The rapid growth of M2 and the ruble appreciation happened in time of unprecedented inflow registered in the first half of this year. If the hopes of analysts materialize and Russia’s rating is upgraded (Moody’s is expected to do it this year), CBR will probably have to resume efforts targeted at the ruble appreciation. In this case, the ruble could hit even the psychological mark of 24 ruble/$, provided the dollar continues to go down against euro.
www.kommersant.com
All the Article in Russian as of Oct. 31, 2007
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