(Article updated on 3 February 2015)In business circles, the question of what will happen to the ruble, the dollar and the euro in 2015, has long passed from the rhetorical to the category of acute and pressing. The small and medium business segment is particularly concerned about the recent changes in the currency markets. This is not surprising at all, given that many settlements, including with foreign suppliers, are made in foreign currency. What can we expect from currency rates in the near future? And is it possible to make forecasts for the long term now? Let’s consider all the available points of view in more detail.The current exchange rates of the U.S. dollar and Euro to the rouble look like this: You can view the advanced online charts of the US dollar and euro movement against the rouble by clicking on the links below:Graph USDRUBGraph USDEUR (We advise you to keep these links to yourself in the bookmarks/selected to keep track of the ruble, which has been extremely volatile in recent months. Our interactive online chart is the most convenient tool for analysis, which you can see for yourself.)What will happen to the ruble in 2015: forecasts and opinionsOvercoming the “psychological” mark of Br40-45 per dollar and the increase in the refinancing rate in the banking sector have provoked small market players to panic. As a result, the USD and EUR rates continue to show growth dynamics, while the ruble exchange rate has shifted from fixed and artificially restrained indicators to “free floating” (Fig. 1). How dangerous is this and what to expect in the future?Fig. 1The current changes in the ruble exchange rate against foreign currencies are a direct consequence of the aggravation of the political situation in the world today. Unresolved territorial and military conflicts, Russia’s partial economic isolation and the reciprocal embargo imposed on some States and members of the business community. All this couldn’t help but affect the economy. And the geopolitical problems associated with local conflicts in the Middle East only add to the difficulties, having a negative impact on the dynamics of the price level of hydrocarbons.What caused the ruble to weaken in 2014?Actually, there are several reasons:
- Conflicts in the geopolitical sphere;
- Sanctions in respect of the Russian Federation;
- Lack of support from exporters for the national currency exchange rate;
- Decrease in oil prices;
- Decrease in ruble exchange rate support at the Central Bank level.
And that’s just the tip of the economic iceberg.What is the expected forecast for the ruble in 2015?Let’s turn to the news reports on our website (you can find them here): the current dollar rate has long exceeded the mark of Br48, while the euro has gone far beyond the mark of Br50. So, should we wait for the rates to stabilize and roll back to their previous values in 2015? Or has the state decided to take the path of default?In fact, exchange rate fluctuations in 2014-2015 are affected by various factors. But the main ones – the decline in GDP growth and the price per barrel of oil beyond the budgeted values – will have an impact on the performance of the Russian economy in the coming year or two.Accordingly, at the moment there are no preconditions for the ruble appreciation to be real in the foreseeable future (Fig. 2). Moreover, the weakening of the exchange rate may partly stimulate the strengthening of the domestic commodity market. And to save the ruble from default is quite capable of increasing oil prices – as soon as they pass the mark of $100 per barrel, the exchange rates are likely to quickly return to the values that have become common for Russians in the last 5 years Fig. 2Expected Outlook: ForecastsThe Ministry of Economic Development of the Russian Federation has traditionally relied not on geopolitics, but on economic factors, which in the long run prove to be much more reliable sources of information.What are the forecasts for the dynamics of the courses? What will be the Euro 2015 exchange rate? And what can you expect from a dollar exchange rate?The forecast of the Ministry of Economic DevelopmentAccording to the already published data, the Ministry of Economic Development specialists assumed that the stage of application of the policy of course containment from the Central Bank would be longer. According to their forecasts, the dollar exchange rate set at the beginning of 2015 should have been 44 rubles. And by the second quarter, some growth of the exchange rate values was planned. If we look at the macro forecast, which is focused on a three-year period of changes in price dynamics in the foreign exchange market, the figures will be as follows: the dollar rate in 2016 will reach 46 rubles, and in 2017 it will reach the level of 50 rubles. Which seems to be a rather bright prospect in comparison with others (Fig. 3).Fig. 3The euro forecast for 2015 looks even less optimistic. The European currency has already demonstrated a growth of 15% from the values shown in the first half of the year. However, according to the aggregate forecasts, since January 2015, we should expect some correction of the exchange rate (Fig. 4) and, perhaps, even a rollback of the euro price to the level of Br50. Fig. 4What should we expect from the dollar in 2015? Here the experts are unanimous in their opinion: the rate will grow, but without sharp fluctuations. On average, an increase of 2-3 rubles is expected during the year. And with the emergence of favorable factors for the Russian economy, we can expect the dollar to stabilize at the level of 40 rubles.World Bank forecastThe World Bank is very skeptical about the prospects of the Russian economy in 2015 and predicts a collapse of the ruble and default. However, the forecast of the market situation in this case is reduced to the assessment of ratings issued by international agencies. And today, to put it mildly, they do not correspond to reality and, in general, can hardly be considered as sources of reliable information.Forecast of foreign banksForeign banking institutions are much more optimistic about the prospects of the Russian economy in 2015. In particular, they predict GDP growth by 1.3% (the Ministry of Economic Development and Trade in its forecast sets zero growth). And the inflation rate is about 6.6%. As for the exchange rate values, Bank of America in its forecast indicated the price level for the U.S. currency in the range of 39 rubles.What are the investors expecting?Against the background of the lack of real opportunities for forecasting the situation in the global currency market, the markets of interbank investments look much more predictable and attractive for investors. As in any crisis periods, when traditional investment instruments fail, the Forex market gets a new stimulus to development.But buying currency in its “physical” manifestation in the near future is not too reasonable – a speculative panic with the advent of the new year is guaranteed to fail. And this threatens, if not to decrease, then to stabilize the courses. And to predict their further movement, taking into account the current geopolitical situation and its impact on the economy, not even the recognized experts are taken. However, there are some forecasts in this regard – they mainly affect the short term. You can find reliable analytical information on our website by clicking hereAs for the forecasts for the next few months, the situation is likely to stabilize. And the prospects of default will not be so realistic. Moreover, the Central Bank has already demonstrated its willingness to participate in fx speculation, artificially contributing to the “acceleration” of the exchange rate of the ruble, dollar and euro. This means that in the near future the panic in the market will subside – small speculators will satisfy their need for foreign exchange reserves. And then they will start dropping them after the exchange rate reversal, allowing the Central Bank to replenish its own currency reserves on acceptable terms.Let me remind you that you can see the extended online charts of the movement of the U.S. dollar and euro to the ruble by clicking on the links below:Graph USDRUBGraph USDEUR