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Ruble's move. Why it's not a good idea to sell Russian currency at the end of the year


The ruble might firm to the dollar on 9% more the following year. Investors shouldn't get rid of rubles, despite of possible weakening of Russian currency in December, informs the ING bank.

At the end of 2016 - the beginning of 2017 oil prices might decrease to $40 per barrel, and US dollar rate – increase to 65 rubles, but investors shouldn't get rid of rubles this time, thinks Dmitry Polevoy - the chief economist for Russia and CIS in dutch bank ING. In his report, published on November, 1 the analyst notes, that the following year ruble might rise to US dollar on 9% to 58 rubles. On Wednesday at the closing of bidding at the Moscow stock exchange it cost 63,5 rubles.

From the beginning of the year Russian currency has firmed to the dollar on 16,5%, showing the second result among the currencies of developing countries after Brazilian real, that has risen on 25%. firming of ruble doesn't look extreme or endangers Russian budget, Polevoy is sure. The main risks for Russian currency the analyst connects with oil prices, possible geo-political shocks and a big amount of speculative positions in ruble contracts and Federal Load Bond.

Considering these risks, the ING bank proposes three scenarios of Russian currency movements in 2017 and 2018. The first scenario is exclusively based on the correlation of ruble with oil prices, the second one apart from oil costs, also takes into account external imbalance, supposing zero capital drain, and the third one is based on different forecasts for capital drain from Russia.

If the first scenario supposes, that current ruble rate is legitimate, then the other two let us hope for the further firming of Russian currency. However, in order to obtain that, the average annual oil price has to amount to $50 per barrel, and capital drain from the country – remain on the low levels, is explained in the report.

According to the first scenario, at a cost of $40 per barrel of brand Brent, fair dollar rate to ruble in 2017-2018 has to amount to 68,5 rubles, at a cost of $50 per barrel – 63,1 rubles, and at a cost of $60 per barrel – 57,7 rubles. If oil prices crash to $30 per barrel, the dollar rate will jump to 73,9 rubles, and at a cost of $20 per barrel it'll amount to 79,2 rubles.

The second scenario, that supposes lagging of capital drain from the country to zero, promises, that at a cost of $40 per barrel the dollar rate will lose ground to 58,8 rubles in 2017 and to 56 rubles in 2018. But if oil will rise to $60 per barrel, dollar will cost up to 47,3 rubles in 2017 and 46,5 in 2018.

In the third scenario the rates' dynamics is predicted depending on the scope of capital drain from the country. For 9 months of this year net capital drain from the country has amounted to $9,6 billion – 5 times fewer than the previous year. At 2016 year end it will amount to $14, expects Central Bank.

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