What will be the dollar exchange rate in May 2020 in Russia

2024 Author: James Gerald | [email protected]. Last modified: 2023-12-17 14:00

Against the backdrop of a sharp drop in the ruble rate in early March, many experts' forecasts on the value of the dollar turned out to be irrelevant. What the situation will be in May 2020 in Russia is also still unknown. It all depends on two main factors: the coronavirus and the cost of oil.

Reasons for the price jump

On March 9, it became known about the collapse of the OPEC + agreements. It was planned that the states supplying oil to the world market would systematically reduce its production in order to maintain the cost of "black gold" at a sufficiently high level.

However, the transaction used production data at the end of 2016, when figures for Russia were at their peak. Therefore, over the past 3 years, the Russian Federation, despite the formal restriction, was able to gradually increase the rate of development of natural fuel reserves.

In 2020, the situation is different. Due to the coronavirus pandemic, the global pace of economic development has fallen, as has the demand for oil. In this situation, a decrease in the rate of oil production would significantly weaken Russia's position in the world market. Therefore, the country opposed the OPEC + decision and withdrew from the deal.

Although the Russian Federation and Saudi Arabia will begin to regulate oil production themselves only from April 1, as early as March 7, there has been an increase in the dollar exchange rate, which intensified on March 9 against the background of the daily collapse of Brent oil prices by 21.5%.

Oil forecasts for May

It is worth predicting what the dollar exchange rate will be in May 2020 in Russia taking into account the fact that the country's leadership took into account the mistakes of 2016. Now, when the oil price is below $ 42, 4 per barrel, the proceeds from the state are used to stabilize the economy.

According to experts from the Ministry of Economic Development, these measures will help the country to withstand a decline in prices of up to $ 20 per barrel for several months, but not fully.

IHS Markit analyst Maksim Nechaev says that oil prices will be maintained at $ 30-40 until May. Therefore, do not expect a sharp increase in the value of the dollar.

Most likely, the rate will be maintained at the level of 72-74 rubles. Although much depends on the levels of oil production that will be realized after the actual rupture of the OPEC + deal with Russia.

On the other hand, Bob McNally, founder of the American consulting company Rapidan Energy, points out that the situation now resembles the times of the Great Depression of the 1930s. With an increase in oil production, the demand for it will only fall.

At the same time, there is no regulator on the market. According to him, in the worst-case scenario, the price of oil could fall down to cents per barrel. In this case, the dollar exchange rate will easily overcome the level of 100 rubles.

Much depends on how well countries manage to cope with the coronavirus outbreak. As soon as the crisis is overcome, oil prices will easily return to $ 50 per barrel and above, and the ruble will recover its positions at the level of 60-62 units per dollar.

However, at the moment, according to forecasts by JPMorgan experts, the United States and the Eurozone will face a recession of about 3%. Therefore, one should hardly count on such a favorable scenario.

Other factors

What the dollar exchange rate will be in May 2020 in Russia depends on oil prices only partially. Other factors should also be considered:

1. Overvaluation of the ruble. Following the strengthening of the national currency at the end of 2019, financial experts considered that its value had become overstated. Taking into account macroeconomic factors, this should lead to a slight easing.
2. Sale of currency. For the first time since 2016, the Ministry of Finance plans to sell funds from foreign currency accounts of Russia. Now they store about 9, 2% of GDP, which will be enough for several years of the crisis. This measure will help to strengthen the ruble and prevent the dollar from rising above 85 units.
3. Internal economic factors. Despite the unstable external situation, RANEPA teacher Vladislav Ginko believes that given the almost complete absence of debts to other countries and policies aimed at strengthening the economy, Russians should not be afraid of a sharp increase in the value of the dollar.
4. The financial director of the VR_Bank fintech marketplace Roman Romashevsky believes that it is not worth buying the American currency, hoping for an explosive growth in its value. Considering the sharp jump in prices on March 9, it will inevitably be followed by the strengthening of the ruble, albeit insignificant.

In fact, for an accurate forecast, analysts recommend tracking news about the spread of the coronavirus and the results of the termination of the deal with OPEC +. Only after April 1, experts will be able to come to a consensus regarding the future situation in the foreign exchange market.

Summarize

1. The dollar rate rose, contrary to last year's forecasts, to 73 rubles due to the rupture of the deal with OPEC +.
2. Oil prices and demand are falling due to the decline in global GDP due to the coronavirus pandemic.
3. We should not expect further weakening of the ruble until April.
4. An accurate forecast of the dollar exchange rate will be guided by the success of the fight against coronavirus and new agreements between the Russian Federation and Saudi Arabia.