Decisive Week For Dollar Exchange Rate Begins In Belarus

Can the Belarusian ruble hold on?

The last week of autumn is over. Another week and another highs. This time the shock happened on the Belarusian currency market. Having smoothly accelerated since early November, the U.S. dollar exchange rate reached a historic high of USD/BYN 3.5951 by Thursday, November 28. In the last trading session, the exchange rate recovered and the month ended with USD/BYN 3.5701, writes myfin.by.

Rate and Trading Volumes Rise

In total, over the last week, the US dollar rate added +4.18% and since the beginning of the year the growth of the ‘quid’ is already +12.36%. In addition, the dollar trading volume for last week rose to $102.475 million.

The exchange rate of the Russian ruble was obviously declining and last week fell to a yearly low of RUB/BYN 3.2927 per 100 Russian roubles. The closing rate for the month was RUB/BYN 3.2981. Last week's trading volume was also at a high of RUB 30683.810 million. This is a little more than 288 million US dollars in equivalent.

The growth of the US dollar exchange rate and the fall of the Russian ruble was an expected event, but not to such an extent. As before, all rate changes in the Belarusian market were due to the fall of the Russian market. On Thursday, November 28, the dollar rate on the Moscow OTC market was rising to USD/RUB 114.5, while the euro was traded above RUB 120. And only after the Russian Central Bank cancelled the purchase of foreign currency on the domestic market on November 27, the ruble began to stabilize and ended the week and the month at USD/RUB 106.64.

Why did the Demand for Currency Increase?

The reason for such a sharp demand for foreign currency is attributed to fears of the domestic market about the recent Western sanctions against Russian credit institutions. First of all, in relation to Gazprombank, through which the main payments for exported energy resources were received.

In addition, the Russian financial authorities consider the current exchange rate acceptable for the state budget, because in such conditions the treasury receives unplanned revenues. Due to the exchange rate difference, the cost of oil included in the current year's budget is significantly higher than the estimated one, and this is extra 100 - 150 billion rubles. Perhaps, after breaking through the psychological level of 110 rubles per dollar, the Central Bank decided that this will serve as a pro-inflationary factor in the short term, but this will most likely happen next year.

Will the Growth of the Dollar Rate in the Russian Federation Affect Belarus?

The dollar appreciation does not pose a threat to the Belarusian budget, as it is levelled by the fall of the Russian currency, which makes imports from Russia to Belarus cheaper. However, exports lose, but due to higher imports, the benefit is obvious.

This week we continue to watch the Russian market and it is not excluded that the correction, which started last Friday, will continue there. After all, sanctions and their consequences are technical problems and as they are solved (workarounds, etc.) the filling of the Russian market with currency will resume.

However, remembering the statement of the Minister of Finance of the Russian Federation Mr Siluanov that the exchange rate is satisfactory - it is unlikely that the ruble will strengthen below 100 rubles per dollar. In addition, at the end of the current week, the November statistics of the labour market in the States will be released, the last one before the Fed meeting on December 18. The data will set the trend for the rest of the month and the year. The forecast is for a rise in employment numbers, and if realised, the dollar exchange rate could strengthen to EUR/USD 1.0450. This will also work against the Russian currency.

Forecast for the Week

In general, the current week may become a defining one for the whole of December and the beginning of the next year. In case the Russian ruble holds around Br100 per dollar, consolidation around USD/BYN 3.48 - 3.50 can be expected on the Belarusian currency market. In this case, the Russian ruble may return slightly above RUB/BYN 3.30 per RUB 100.

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