VIEWPOINT: We're expecting ruble to be at 64-65.50/$1 for next week - Promsvyazbank
MOSCOW. May 27 (Interfax) - "Last week, the Russian ruble, South African rand, Mexican peso, and Chinese yuan gained 0.1-0.6%. The Turkish lira (which weakened) and the Brazilian real (which strengthened further) stood out from the main group of EM currencies due to domestic factors. Investors' general attitude to EM remains the key driver for the ruble. Russia will see the peak of tax payments in the next two days. Today Russian companies are paying the VAT, MET, and excise taxes, and tomorrow the profit tax. We expect the total volume of payments these two days to be about 1.24 trillion rubles. Remember that today is Memorial Day in the U.S. and a bank holiday in Great Britain, so the trading platforms of those two countries are closed today. Theoretically, if any player in the Russian market needs additional ruble liquidity to pay taxes, the company might come up against the 'narrow market' factor, though, of course, in the base scenario we expect that market players prepared for tax payments ahead of time," Promsvyazbank analyst Mikhail Poddubsky said.
There are no clear domestic factors affecting the ruble, he said. "Given current oil prices and macroindicators, a fair exchange rate for the dollar/ruble pair, according to our model, would be around 63 rubles to the dollar. However, with investors' attitude to EM assets not improving and sanctions risks remaining for the ruble, we think that it's hard to realize the fundamental growth potential. The positive seasonal factor for the current account balance, which has been supporting the ruble since the beginning of the year, has been exhausted; we've been observing seasonal worsening of the current account in Russia since the middle of the second quarter. Accordingly, in the next few months, the inflow of currency through the current account will be comparable to the volumes of purchases of foreign currency under the fiscal rule. In the next week, we're expecting the ruble to be at 64-65.50 rubles to the dollar. In the short term, the trends for the ruble and other EM currencies will be primarily determined by the general risk appetite in markets," Poddubsky said.
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