What can traders expect from the ruble in April?
Since the end of winter, we are all living in a new reality. After the start of the military operation by the Kremlin in Ukraine, a line that divided the world into "before" and "after" was drawn. Today we will talk about the prospects of the ruble in this new world.
After the start of the special operation, the Russian currency flew to historical lows. However, during March, it could return to the area where it was before the start of the conflict. The ruble has strengthened thanks to the efforts of the Kremlin, but will it be able to maintain its current position?
External factors
Let's start with the main rival of the ruble - the American currency. To understand what to expect from the ruble, you need to look at what is happening in the world. Europe is struggling with the war, and the coronavirus in China does not recede. Now the dollar is in high demand, mainly as a safe-haven asset. In this light, the United States, with its dollar, looks like a haven for capital.
In addition, the chance that the current French president will win the second round of the presidential election has decreased to 53%. If Emmanuel Macron loses, Euro-skeptic Marine Le Pen will become the head of France, who will advocate France's independence from the European Union, which also puts pressure on the euro, increasing the chance of the European currency falling to the 1.08 area.
According to the latest data, the US economy looks more robust than the European one. In addition, the Fed began to tighten monetary policy and prepare to reduce the balance sheet. According to experts, the Fed's aggressive policy could increase the growth of the dollar by 3-5%.
The divergence in monetary policies between Europe and the United States, economic and energy self-sufficiency, and the remoteness of the United States from a military conflict in Europe will make the dollar more attractive for investment than the euro for some time. It will not last long as a powerful recession soon comes to the United States, ending the dollar rally. Nevertheless, it is still far away, and for some time, the dollar will bathe in the rays of glory, which is not very good for the ruble, as a strong rival will try to pull the Russian currency down.
Oil on the side of the ruble
The oil market is under the influence of opposite drivers. On the one hand, the price of oil is being pressured by the decision of the White House to open up strategic oil reserves to channel them into an overheated market. In theory, American reserves should be enough to cover the deficit, especially if other countries join this action.
Nevertheless, many investors are skeptical about the US decision. According to analysts at Goldman Sachs, logistical problems and a potential overflow of oil storage facilities in the United States could prevent a new volume of oil from entering the market, which will slow down the increase in crude production in the country.
In addition, the OPEC oil cartel has decided not to change its plans. It will continue to increase monthly production by no more than 400 thousand barrels per day.
A supporting factor for oil prices is the threat of interruptions in oil supplies from Russia, which will appear due to sanctions pressure. The French president has already called for a new package of anti-Russian sanctions that will affect oil and gas exports, preventing the market from reaching the status quo.
Of course, the US can come to an agreement with both Iran and Venezuela and send some of their oil to the market, but this is unlikely to happen soon, considering Iran's strict requirements.
Given all of the above, we believe that the commodity market will remain overheated and will be above $110 per barrel in the coming quarters, allowing the Kremlin to earn more than one billion dollars in 2022 by using them for strengthening the national currency.
The situation with the ruble
The main driver for the ruble is still geopolitics, which is playing against the Russian currency at the moment. The hopes that had arisen for an early conclusion of peace between Russia and Ukraine are collapsed, increasing the risks of imposing new sanctions against the Kremlin. Being in the new sanctions, Russia will be banned from exporting semiconductors and be imposed an embargo on the export of coal and wood from the country. Restrictions will also apply to two banks: Sberbank and Alfa-Bank.
Moscow's decision to sell gas for rubles to non-friendly countries strengthened the ruble for a while. Still, in the long term, it remains controversial, as there are high risks that the West will refuse to purchase raw materials for rubles. The Kremlin will likely use this trump card in future negotiations with the West, which will begin anyway.
The second risk factor for the ruble remains the price of oil. Yes, now it is at levels that are interesting for Moscow. Still, it is unlikely that the benchmark will remain so high in the long term since the high price hurts the global economy, hindering its growth.
It is expected that oil prices will decline in the second half of the year. The National Bank of the Russian Federation will not hold the ruble, which will fall to March lows of 115-120 per dollar. In such a scenario, the Ministry of Finance will need a weak Russian currency to compensate for decreased federal budget revenues from lower commodity prices.
But this is a matter for the nearest future. Anyway, for now, the ruble looks strong, not only because of the high energy prices but also because of the actions of the Central Bank and the government, which directed all efforts to stabilize the situation. In addition, there are few speculators on the market, and there are no large investors. For these reasons, the ruble is weakly reacting to external and internal news now, and only geopolitics seriously impacts it.
How to trade in the current conditions? A long-term forecast is now useless since the situation in the world can change at any moment. It is better to avoid trading in Russian currency altogether and find an adequate alternative to secure your savings. You can invest in cryptocurrencies that have now resumed growth after a protracted correction. Gold is now unlikely to repeat the rally of recent weeks and will tend to decline to lower levels.
As a diversification method, you can consider investing in RAMM copy trading, for example, with the AMarkets broker. Having collected a portfolio of aggressive and conservative strategies, you can survive turbulent times.
As for the ruble, the current situation is likely to continue in the coming weeks. The exchange rate of the Russian currency for the dollar will remain in the range of 90 to 100, and for the euro, from 95 to 115.