Last week, the dollar exchange rate on the over-the-counter market sharply increased its fluctuations. Intraday movements reached 5 rubles/$, although by the end of the week the dollar exchange rate had only gained 2.5 rubles, reaching 89.4 rubles/$. This was partly due to large purchases of currency by importers and companies cutting back on their business in Russia. Previously, large volumes were “absorbed” on the exchange market, but at present, due to sanctions, this sales channel has become unavailable. The interbank market remains less transparent and more fragmented, which leads to sharp changes in rates.
The end of the week on the Russian currency market can be called calm compared to what happened in the previous days. During Friday trading on August 16, the dollar exchange rate on the over-the-counter market fell to 87.73 rubles/$, but by 19:00 it had returned to 89.44 rubles/$. This is only 54 kopecks higher than the closing value on Thursday and 2.54 rubles higher than the end of the previous week. Thus, it returned to the values at the beginning of June, that is, before the Moscow Exchange was forced to stop trading in “toxic” currencies due to sanctions (see Kommersant of June 13).
However, at the beginning of the week, intraday movements of the American currency were several times stronger and not always in favor of the ruble. On Monday, the dollar exchange rate soared by more than 4 rubles and exceeded 91.8 rubles per dollar. On Tuesday, it had already reached 93.75 rubles per dollar, the maximum since the beginning of May, although by the end of the day it returned to 90.5 rubles per dollar. On Wednesday, the dollar exchange rate fluctuated in the range of 88–93 rubles per dollar, while the day ended at 89.8 rubles per dollar. On Thursday, the range of fluctuations shrank to 88.3–90.5 rubles per dollar. All these movements were reflected in the official rate of the Bank of Russia, which is currently calculated on the basis of over-the-counter transactions made before 15:40.
On Tuesday, the rate reached a local maximum of 92.66 rubles/$, and on Friday it returned to 88.9 rubles/$.
Against the backdrop of such sharp movements, fluctuations in the yuan exchange rate were symbolic and did not exceed 1.6%. At the end of the week, the Chinese currency rate rose by only 22 kopecks (1.8%), to 12.07 rubles/yen. This is 42 kopecks (3.5%) lower than the local maximum set on June 13.
High volatility on the over-the-counter market is associated with serious market fragmentation and, accordingly, low liquidity in certain segments, analysts at Raiffeisenbank note. It is caused primarily by the cessation of exchange trading in currencies and the transition of all transactions with «toxic» currencies to the over-the-counter market, which is less transparent and more fragmented, since there is no single «order book» (as on the exchange). FG Finam analyst Alexander Potavin does not rule out the possibility that in the first ten days of August, Russian banks executed one-time requests from non-resident clients to withdraw currency abroad from the sale of Russian assets.
In addition, fewer and fewer banks and professional participants can work with «toxic» currencies and smooth out market inefficiencies. «Now, much smaller volumes of demand or supply are needed for sharp exchange rate fluctuations than before,» says Mikhail Vasiliev, chief analyst at Sovcombank. In addition, August is a seasonally less capacious month for the currency market due to the holiday period.
The situation on the market has been worsened by the tightening of conditions for making currency payments in yuan.
«Chinese banks, despite the postponement of the date of sanctions against the Moscow Exchange from August 13 to October 12, have sharply limited their transfers from the exchange,» notes Evgeny Loktyukhov, Head of the Economic and Industry Analysis Department at PSB. At the same time, as Alexander Potavin notes, the volume of export revenue has decreased against the backdrop of falling oil prices. As a result, a local deficit of yuan has emerged on the market, which has contributed, among other things, to a shift in demand on the over-the-counter market to «toxic» currencies.
In such conditions, market participants do not rule out the continued high volatility of exchange rates in the coming week. According to Mikhail Vasiliev, the dollar exchange rate will fluctuate in the range of 88-92 rubles per dollar, and the yuan exchange rate in the range of 11.9-12.4 rubles per CNY. Traditionally, the ruble will receive support towards the end of the month: exporters are required to pay the main taxes by August 28 and will be more active in selling foreign currency earnings for settlements with the budget. «The trade balance surplus, the reduction in imports due to problems with payments to friendly countries, the mandatory sale of foreign currency earnings for the largest exporters, the sale of yuan from reserves as part of budget operations and high rates on ruble instruments are in favor of the ruble,» notes Mr. Vasiliev.
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