Oil will Strengthen the Ruble

On July 19, 2012, the USD exchange rate dropped sharply: on the basis of the results of a single trading session with settlements “today” at 15.00 Moscow Time the US dollar fell by 33.59 kopecks and amounted to Rb 32.0690 per USD.

Appreciation of the RUR was facilitated by growth in global oil prices which at present amount to about $106 a barrel which value is quite high for the index.
In the past months, the oil price was the minimum one in the third decade of June. In the same period, the ruble depreciated a great deal, but it was adjusted by currency interventions by the Bank of Russia. From the beginning of July, an upward trend in oil prices has been observed and that is evidence of the fact that the market regarded the Middle East risks to be more serious than downside risks of business activities in East and Southeast Asia.

Speaking about the dynamics of oil prices, it is rather difficult to predict the behavior of that index.   For instance, a complicated situation in the Middle East which makes oil prices rise can be offset by forecasts of downside risks of business activities  both in Europe and the US and Southeast Asia.

However, as regards Russia in the short-term prospect considerable oil price fluctuations are not advantageous to the Bank of Russia as it will have to make additional effort to reduce both inflation risks in case of a sharp rise in prices and liquidity risks in the banking sector in case of a sharp drop in oil prices.
А.Yu. Knobel, PhD (Economics), Head of the International Trade Department