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Dollars Dive against Ruble
December 6, 2006 13:11

American currency is plunging. The process started last week, by Friday the dollar fell against the ruble to the rate equal to that of seven years ago. In the short run we’ll witness 26.25 of the ruble against one dollar, say analysts. On Monday American currency’s dive gave the rate of twenty months’ minimum against the Euro. On the whole the dollar lost 28 kopeks during the last few days. Analysts think the negative US sumstat showing economic growth retardation is the reason for collapse of dollar exchange. In view of the fact traders expect the lowering of refinance rate by the Federal Reserve System. Thanksgiving, which cut the working week in the USA and lowered liquidity, adversely affected the dollar, too.

However, such dollar’s dive is neither to the USA, nor to Europe advantage. That’s why the FRS or the ECB’s representatives will shortly try to calm down the market, said analysts on Friday. This Monday the French minister of finance reported that he would discuss the current situation with his colleagues from other EU countries. After the claim the dollar regained some of its positions. Anyway, experts are firmly convinced that this growth won’t be long-lasting.

 The dollar is going to fall against the Euro. The most of analytics today agree in opinion that before 2006 is over the dollar is to hold the rate of $1.30-1.31. According to the prognosticators, the rate of the dollar against ruble may amount to 26.4 rubles per $1. The end of 2007 will probably show $1.4-1.42 per Euro, but the ruble rate is much harder predictable: there are too many factors able to affect it. If oil prices exceed $60 per barrel, the dollar exchange will fall to 26 rubles per dollar. If oil prices go down, then, despite the Euro’s growth the ruble’s rate is unlikely to change, it will probably be set at 26.5-27 rubles per dollar.

 Due to the recent changes Russia hasn’t lost a lot, as the Central Bank and the Stabilization Fund of Russia possess the foreign exchanges reserves formed not only by dollars but Euro, too. Thus, the total cost of the currency holdings remained the same. The next year federal budget is also unlikely to be harmed, since it was formed on the assumption of 26.3 rubles per dollar rate. There is nothing to worry about in the fuel-and-power sector: the upraise in the oil prices seen recently compensates the dollar’s weakness with interest. Nevertheless, other national manufacturers risk ending up losing. Six months ago, when the exchange rate reached the point of 27 rubles against the dollar, the Russian minister of finance speaking at the State Duma claimed, “the ruble restored its weight to the level of 1998 (before the financial crisis) and the further strengthening of the national currency may become a critical point for the Russian industry. The comparative cheapness of domestic production, considered to be its main advantage, has been secured due to the exchange rate of the ruble against the dollar. Taking into account the gradual strengthening of the ruble this advantage is coming to naught. Low production standards, outmoded facilities and the lack of necessary technologies make the Russian industry unable to compete with developed markets. The more obvious the situation is in the fields of aircraft building, motor-car construction and production of consumer’s goods.



Olga Pletneva

Tags: Russian rouble Russian economy    

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