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    The course between word and deed // The dollar and the euro fell on the annexation of territories and rose on the speech of the President of the Russian Federation

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    The growing geopolitical tension around the territories annexed to Russia has collapsed the rates of “unfriendly” currencies. The euro exchange rate fell to an eight-year low, the dollar exchange rate fell to a minimum since the beginning of July. However, less harsh than expected statements by the President of the Russian Federation reassured investors, and panic selling of toxic currencies gave way to buying, raising their rates above the close of the previous day. since the beginning of March this year. With the start of the main trades, the dollar exchange rate confidently went down and by 14:30 fell to 53.23 rubles / $, which is almost 4 rubles. lower than Thursday’s close. The euro exchange rate collapsed more rapidly, reaching 50.73 rubles / € in the middle of the main session, the lowest value since October 2014. And judging by everything, the released rubles largely went into the Chinese currency, the exchange rate of which even grew a little (although it used to repeat the movement of the dollar). This led to a widening spread between the domestic (6.41 CNY/$) and foreign (7.08 CNY/$) dollar/yuan exchange rates.

    intensification of geopolitical tensions on the eve of the signing of agreements on the entry of four new territories into the Russian Federation and the statement of the President of the Russian Federation. “There were fears that Vladimir Putin during his speech would announce a change in the status of the conflict between Russia and Ukraine,” notes a Kommersant interlocutor on the market.

    This will make it impossible to exchange trade in dollars and euros, and also increases the risk of currency freezing on the brokerage accounts of Russians. “In the absence of an exchange rate and increased currency risks, banks will carry out currency transactions at their internal rates. In addition, new commissions for storage and transactions with non-cash dollars and euros will probably be introduced, which will make them even more toxic,” said Mikhail Vasiliev, chief analyst at Sovcombank.

    In such conditions, investors preferred to leave in “friendly” currencies, primarily in the yuan. According to Mikhail Vasilyev, Russian companies and citizens have tens of billions of dollars worth of “unfriendly” countries’ currency reserves, which creates a potential overhang that will further strengthen the ruble.

    The President of the Russian Federation did not have time to finish his speech , as the dollar and euro exchange rates won back most of the losses, and at the end of the auction, the dollar exchange rate reached 58.45 rubles / $, having added 1.24 rubles per day. The euro exchange rate returned to the level of 56.7 rubles / €, which is 1.23 rubles. higher than Thursday’s close.

    The stormy change of mood among investors occurred due to statements of the head of state that were less harsh than market participants feared. “The status of the conflict between Russia and Ukraine, in fact, has not changed. In addition, Vladimir Putin called on the Ukrainian authorities to return to the negotiating table, which in the current situation may well be regarded as constructive rhetoric. As a result, the ruble began to weaken not only against the dollar and the euro, but also against the yuan,” says Mikhail Shulgin, head of the global research department at Otkritie investitsiya.

    However, market participants do not expect long-term market stabilization. Course movements will entirely depend on the development of the geopolitical situation and the sanctions response of the West to the annexation of new territories. According to the head of investment strategy and analyst at Expobank, Polina Khvoynitskaya, if the dollar quotes manage to gain a foothold below 55 rubles/$, then the level of 50 rubles/$ will be the next frontier. If the exchange rate stays close to 55 rubles/$, then we can expect movement within the range of 55–61 rubles/$, the expert believes.

    According to Mikhail Shulgin, in the foreseeable future, the Chinese currency can return up to 9 RUB/CNY and even higher. This will be facilitated by further substitution of the dollar and the euro in the Russian economy and financial system. “By the end of the year, it is not excluded that the Ministry of Finance will return with purchases of yuan into reserves under the budget rule,” Mikhail Vasilyev points out.

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