Whether the ruble started to recover the lost positions

In April, despite the correction at the beginning of this week, the ruble became significantly stronger against the US dollar. Less than a month, the monthly average ruble exchange rate rose by 17.5% in relation to an average monthly rate of January, 2015. Such prompt rise in our currency put it on the first place in the world by profitability for investors. It seems that it is worth being positive to this news, but not everything is so simple. The country’s currency, with such large economics like Russia, should not show that kind of strong and greatly speculative volatility, which is observed since the second half of last year – the period of accelerated depreciation, and till today - equally rapid recovery.

On the one hand, the strengthening of the ruble is advantageous for customers, as the country largely depends on import of products because of the absence of similar products in our country or non-meeting the necessary requirements and properties. Falling costs of imports will lead to some decrease in rates of inflation, which has already reached 16.3% in annual expression. High inflation devalues salaries and directly influences on living standards. On the other hand, cheap ruble gives new incentives for the development of import substitution and industry in general; besides, the dropping-out income of the budget is compensated by export of energy resources considerably fallen in price.

One of the most important factors, which influence on strengthening of the ruble against dollar, is the rise in oil prices and also the absence of large-scale military operations in the east of Ukraine. These factors decrease the geopolitical pressure on Russia with the corresponding confrontational rhetoric from Western leaders.

It’s time for large Russian companies to pay budget taxes. Those companies, that receive income in foreign currency, have to exchange it for rubles. As a result, it increases the demand for rubles and the cost of Russian national currency. The absence of significant foreign debt payments of Russian companies in April gives the support to ruble.

The additional factor (but not the defining) became the fact that Russians recently began to get rid of foreign cash, which was bought at the excessive demand for it.

Besides the structural problems in economy, the number of external factors will influence the ruble. Escalating conflict in Yemen, in which Saudi Arabia is involved, and lifting of sanctions against Iran, have made the oil price forecasts more uncertain. The possibility of renewal of hostilities in Donbass will continue to be used for economic impact on Moscow.