In late 2013 – early 2014, the ruble fell significantly against the dollar. But by June, the situation, as shown by trading schedules on international currency exchanges, has developed more in favor of the Russian banknote. Which trend is considered fundamental? Will the dollar grow in 2014 in the coming months against the ruble and other world currencies?
Fundamental factors of the ruble weakening
Experts of the international currency trading market, trying to assess the prospects of Russian money, formed two camps. Representatives of the first are confident that the ruble will still weaken in the future - as it did in the first months of 2014. They are opposed by analysts (mainly government representatives) who believe that there should be no concern about the national currency rate. At the same time, the figures are eloquent: at some points in trading, the US dollar was worth 35 rubles and above, reaching historic highs.
What are the reasons that the ruble has so significantly “sank”? Experts identify several groups of factors. Firstly, the Central Bank significantly weakened control over foreign exchange trading involving the ruble. Thus, without intervention, the Russian currency was slightly weaker than with their presence. Secondly, the growth of the dollar was facilitated by the citizens of Russia themselves, who were actively buying up American money. Thirdly, there is an interesting factor - from the economic point of view, the government itself is profitable for a weak ruble, since the bulk of exported goods are sold for foreign currency, mainly just US dollars. Businesses whose products are delivered abroad, as well as the country's budget, feel only more comfortable because the ruble is losing value.
Ruble and dollar: forecast figures
In the expert environment, a variety of figures are called, reflecting the further exchange rate of the dollar for 2014. However, each of the forecasts takes into account very specific reasons that encourage the growth or fall of currencies. The discrepancies in the vision of the dollar against the ruble, therefore, are due to the difference in experts' assessment of the possible influence of key factors on the value of Russian money. For example, if the price of oil decreases from current values of just over $ 100 per barrel to 80, then the ruble, analysts say, will inevitably fall in price to 38-39 units per dollar.
If the price of "black gold" is higher, then the Russian currency with a high probability will simultaneously rise in price. Interestingly, the citizens of the Russian Federation themselves are quite pessimistic. Recent sociological polls have shown that for the most part Russians expect continuation of devaluation phenomena.
Dollar and world currencies: a word to financiers
Analytical agencies and experts working in the homeland of the American currency are trying to determine what are the prospects for the banknote in the market. Among them are those who believe that it is legitimate to make a positive forecast for the dollar, for 2014, at least.
A lot of things in the vision of the prospects of the foreign exchange market, experts say, depends on trading with the participation of other banknotes, in particular, between the pound sterling and the euro. Some American analysts believe it is more likely that the British currency will rise in price relative to the "continental" due to the fact that the European Central Bank will continue to weaken the policy of interference in trading. The dollar will grow, experts say, and in relation to their counterparts from Canada and New Zealand, since the news about the state of the economies of these countries is not entirely positive.
Is the growth of the dollar against the ruble fundamental?
There is a version that the drop in the ruble’s exchange rate as an emerging market currency is due to the fact that in the USA, the country with the largest economy in the world, things are getting better, as a result of which investors trust the dollar more. Approximately the same processes can be traced in Europe. The Russian market (as well as other developing countries), in turn, as some analysts believe, may not seem attractive enough to investors. The current potential for the development of the Russian economy, the proponents of this point of view believe, has been exhausted - we need new industries, innovative types of businesses. Among the advantages of the Russian market are a balanced budget, the presence of international reserves. Oil, analysts say, is unlikely to fall in price below $ 100 per barrel. Thus, the further growth of the dollar in 2014 against the Russian currency, on the one hand, has a foundation in the form of successes in the American economy, and on the other, a counterbalance in the form of the relative stability of the Russian market, which has reserves and liquid export.
Economic factor
Let us dwell on one of the factors determining the growth of the dollar against the currencies of developing countries, including the ruble (and, in some cases, also banknotes of developed countries) - we are talking about successes achieved in overcoming the crisis by the Americans. Financial institutions related to the US market name many positive trends that allow us to talk about the normalization of affairs in the country's economy.
The monetary policy of the Fed, experts believe, will be sufficiently soft and therefore conducive to the growth of stocks on stock exchanges. Treasury bonds will have a stable yield. In turn, things on the European market are going slightly different. Bonds of some Eurozone countries are starting to rise in price. The European Central Bank pursues, according to analysts, not quite an effective monetary policy.
Negative for the "American" scenario
In mid-June 2014, the US Federal Reserve held a meeting on further monetary policy. Right at the moment when the press conference was held by the head of the Federal Reserve System, the dollar fell sharply in price. The Fed decided to lower the expected US economic growth figures in 2014, as well as keep the previous calculations for 2015-2016 in force. Financiers expect the same inflation rate, the unemployment situation promises to improve somewhat.
However, the US trade deficit has grown much more than planned - mainly, analysts say, due to falling exports. The Fed plans to maintain the value of minimum interest rates. Experts do not expect any revolutionary changes in US monetary policy, so not many dare to give strong forecasts for the growth of the dollar. 2014, therefore, may not be a key one for the American currency in terms of consolidating positions in relation to the money of developed countries, as well as the pound and the euro.
Factors affecting the exchange rate
What determines the market price of national currencies? Similar to the pricing process for any other goods, the main mechanism that determines the value of banknotes of different countries is supply and demand. In turn, the conditions for the formation of the parameters of these two phenomena depend on some other factors. Among them - the foreign trade balance of the country that is the issuer of the currency, the monetary policy of the authorities (central banks), as well as political priorities. Regardless of the period of time in which the growth dynamics of the dollar is observed - 2014 or another year - these patterns are relevant.
Foreign trade balance as one of the key factors
The inflow of foreign currencies to the national market depends on the magnitude of the export of goods and services. To pay the costs associated with the production of their products, exporters buy the national currency - the higher the volume of sales abroad, the higher, respectively, the demand for the country's domestic banknote and the higher its rate at auction. Importers, in order to buy something abroad, must first acquire foreign currency.
They form demand for it domestically. The more intense the import, the greater the demand for foreign banknotes, and the lower the rate of national money. For the dollar, all these patterns are equally relevant. Therefore, investors, assessing the likelihood of whether the dollar will grow in 2014 and with what intensity, study primarily US foreign economic statistics. An important factor determining the figures in foreign exchange trading is the state's balance of payments. If it is positive, then this contributes to the growth of the national banknote. Therefore, if things are going well in the US economy this year, and the balance is characterized by positive trends, then the dollar exchange rate for 2014 is highly likely to be predicted as high.
Currency emission as a factor in the formation of the exchange rate
The main forms of supplying the currency of the market are printing and issuing loans to private banks, both types of operations are carried out by the state and its associated financial institutions. If the money supply of the economy is fast, then the intensity of demand for banknotes may not keep pace with this, as a result of which the exchange rate may decline. Experts, forming the forecast for the dollar for 2014, thus assessing the activity of printing banknotes by American financial institutions, as well as their activities in the field of lending to private banks. For example, in the 2008 crisis, the so-called Paulson Plan was adopted in the United States. According to this project, banks were supposed to receive loans, and securities from financial corporations - to be redeemed.
Other states sometimes take similar measures - for example, in Russia until 2006, obligatory partial sale of foreign currency earnings by exporters was practiced. In addition, by conducting various kinds of interventions in the national market, central banks can maintain the exchange rate of domestic money artificially. Assessing the likelihood that the dollar will grow in 2014 relative to the ruble, experts look in this way at the Central Bank of Russia policy regarding interference in foreign exchange trading.
