The Russian Central Bank forecasts that the value of the country’s currency will appreciate in the near term. According to estimates, people in Russia bought USD 60 bln. worth of foreign currency after the beginning of the recession. As the director of the Banks’ Financial Market Operations Department Sergey Shvetsov believes, when more and more people sell back foreign currency, the strengthening of the rouble will last through the remaining months of the year.

While economists think that the USD 70 bln. figure also includes foreign currency funds accumulated during prior years, the number is still very high. The reserves of the Central Bank have decreased by

USD 200 bln. since the fall of 2008. For comparison, the volume of foreign currency in the hands of private citizens in Russia is 23 percent more than the total of the country’s exports during the first quarter of the year, which stood at USD 57 bln. The figure is also three times as much as Russia’s current trade surplus of USD 23.4 bln.    

If massive sales of foreign currency take place, exchange trading will certainly be impacted. When the demand for the Russian rouble intensifies, banks would be compelled to trade in foreign currency on the exchange. At the same time, it does not seem likely that Russian citizens would decide to convert their savings to roubles anytime soon.

According to the head of the Financial Markets Department of MDM Bank Vasiliy Zablotskiy, Russian people would not just do something all of the sudden. A significant shift can be precipitated by a change in the economic situation. One such market alteration was the depreciation of the Russian currency. For an opposite reaction to occur, the rouble needs to be substantially strengthened. “By the time this happens, banks and commercial investors would switch back to the Russian currency, and the actions of the general public would not have much weight.” The likelihood of such trends’ taking hold at this time is very small.     

Senior Deputy Director of Central Bank Alexei Ulyukayev made a statement that a rate of exchange of the Russian currency to the dollar-euro basket at the level of 35 roubles would be fully justified. According to Ulyukayev, the Russian economy would be “comfortable” with the price of USD 30 per barrel of Urals crude oil. It is not likely that the exchange rate would go over 40 roubles by the end of the year.

Experts at Russia’s banks are not in agreement with the assessments of the Central Bank. The prevailing opinion has it that the Central Bank will be forced to reduce the value of the rouble by 15 percent, so that the value of money could reflect the contraction of the economy.  By some estimates the exchange rate may reach 45 roubles.

Sergey Shvetsov of the Central Bank concedes that the rate of exchange is inextricably connected to the price of oil. Since there is no reliable forecast of oil prices, it is not possible to ascertain the volume of capital outflows from Russia. On the basis of information currently available, outflows can get up as high as USD 170 bln.