The ruble: seasonal weakness

RUSSIA ECONOMICS - In Brief 03 Aug 2020 by Alexander Kudrin

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In the past several weeks, the Russian ruble underperformed many other EM currencies. At the same time, Russia's fundamentals didn’t change significantly. As monthly foreign trade surplus is relatively small (in June it can be estimated at $4.2bn and in July should not yet differ much) the exchange rate becomes very sensitive to various other variables. A specific combination of the following factors pushed the ruble lower against USD:in July FX interventions, that supported the ruble in the previous months, decreased by a factor of two compared to June. It is expected that in August they will shrink even more. The exact amount of daily interventions will be announced by the Ministry of Finance within days.the economy in July performed better than in the previous months. Hence some increase in imports.dividend payment season (dividends are paid in rubles, but then some part of them is converted in USD and transferred to ADR/GDR holders). As the trade surplus is small these days, dividend payments have a greater relative effect on the ruble than usual. The current account may have temporarily been slightly negative in July but is expected to turn positive later on as the weaker ruble is likely to trim imports going forwardas the CBR cut its key policy rate by a cumulative 125 bp in recent months, an appetite for OFZs from foreign investors decreased and is unlikely to jump any time soon.partial reopening of borders (especially with Turkey, which already boosted demand on outcoming tours). By some estimations, additional demand for FX form the household sector may reach $0.5bn or so, which also could have had an impact on the ruble.On top of that, speculations about pote...