Argentine ruble exchange rate

The Central Bank capitulated: none of its steps led to the stabilization of the banking system and financial market. And last week, the Central Bank, without resistance and without explanation, surrendered the new currency corridor established three weeks ago and let the ruble float freely. The weak ruble immediately sank. And if the government does not take emergency and radical measures in the very near future, it will not surface.

Only dollar
As we expected, the Central Bank was unable to keep the dollar at the upper limit of the currency corridor - 9.5 rubles. Moreover, last week he completely refused to support the ruble exchange rate. The Central Bank withdrew from the foreign exchange market, as a result of which the volume of transactions in the dollar fell: if at the end of August the capacity of the over-the-counter foreign exchange market was estimated at $100 million per day, then last week this figure dropped to $40-50 million. Almost no one remained on the market the seller, on the contrary, all the rubles obtained by hook or by crook were used by banks, enterprises and citizens to buy dollars. As a result, by the end of the week the dollar was already worth 18 rubles.
An attempt to return to the practice of determining fixing on the MICEX led nowhere. The Central Bank has established artificial restrictions on the growth of the exchange rate: the prices of dealers' orders on the MICEX cannot differ by more than 5% from the dollar exchange rate tomorrow of the previous day. As a result, the rate on the MICEX on September 3 was set on the basis of transactions with a total volume of only $100 thousand (!) and amounted to 13.46 rubles. And after the closure of the MICEX, dealers began trading in dollars at 16-18 rubles, and at these prices about $70 million has already changed hands. Feel the difference.
Moreover, with the departure of the Central Bank from the foreign exchange market, a whole “family” of exchange rates appeared. Today on the market there are: the closing rate of the MICEX, the rate of the over-the-counter interbank market SELT, the official rate of the Central Bank, rates of exchange offices and, finally, the dollar rate on the black market. And they are radically different from each other. For example, on September 3, when the currency exchange resumed operations, on the black market the dollar was worth 16-22 rubles, while the official Central Bank exchange rate was 13.46 rubles. It is not surprising that the majority of economic entities completely lost their orientation, and exchange offices preferred to close in order to avoid unforeseen losses that could arise within just a few hours.

Alternatives to the dollar
There is one more problem. The more uncertain the situation with the dollar exchange rate becomes, the worse foreign investors feel, feverishly calculating losses from the revaluation of restructured Russian government bonds. Even if we imagine for a moment that the Ministry of Finance unfrozen GKOs and OFZs and paid off its debt to foreigners, at an exchange rate of 18 rubles/$ they would have lost 2/3 of their foreign currency investments. And taking into account the restructuring, they will return not a third of the money invested, but half as much.
It seems that foreign investors have finally said goodbye to the money invested in Russia. Last week, many foreign banks and corporations were no longer stingy in assessing their losses. Part of the fall in Wall Street prices (see page 36) was caused by news agency reports that companies investing in Russia would see sharp declines in profits, or even losses, in the third quarter.
In order to finally imagine at least the real scale of losses, foreigners needed clarification from the Ministry of Finance and the Central Bank regarding the exchange of GKOs and OFZs. But the joint letter from the Central Bank and the Ministry of Finance did not soften the confiscatory nature of the conversion of securities and only clarified two significant points. Firstly, it became clear that the Ministry of Finance will exchange frozen GKOs and OFZs for 33 new bonds. These will be three global issues (with maturities of 3, 4 and 5 years) of 11 tranches with different maturities. Each “refused” bond is exchanged for three new ones, and the longer the maturity period for GKOs and OFZs, the longer the maturity period for the bonds from the three global tranches for which they are planned to be exchanged.
Secondly, the Ministry of Finance explained that when converting OFZ coupons will be taken into account at their nominal value, of which the owners will receive only 5% in “real” money. Moreover, each OFZ coupon is considered equivalent to GKOs with the same payment and repayment terms. This means that each OFZ coupon will be exchanged for new Ministry of Finance bonds, similar to GKOs. So OFZ owners found themselves in a more advantageous situation.
But the worst fears were confirmed: the explanations of the Ministry of Finance and the Central Bank did not say a word about the secondary circulation of new securities. This means that the money of anyone who trades in the bail bonds could be frozen for years. So, no real alternative to the dollar has been created in this area. Moreover, after September 26, when the early bond exchange ends, 15 billion rubles will appear on the market, which the Ministry of Finance must pay to those who agreed to its terms. If before this time it is not possible to stabilize the situation on the foreign exchange market, these rubles will go into dollars.
A desperate attempt to offer the market an alternative to dollars was made last week by the Bank of Russia. He announced the placement of his own zero-coupon bonds (colloquially “beavers”). At the same time, the Central Bank did not agree to a yield of more than 70% per annum, while the current growth rate of the dollar exchange rate corresponded to a yield of 1000-1500% per annum. Needless to say, under these conditions the Central Bank’s idea simply failed.
The only thing that could potentially increase the demand for Central Bank bonds is that the Central Bank, apparently, will begin to issue pawn loans only against the security of its bonds. In our opinion, the Central Bank does not reduce the prices of “beavers” also because among their potential buyers there are no large banks: neither Sberbank, nor Vneshtorgbank, nor ONEXIM, nor banks with foreign participation (except Republic National Bank).

The future of the dollar
In a word, all attempts by the Central Bank to stabilize the financial market and banking system are now in vain. The rubles he could theoretically inject into the banking system to revive it will spill over into the foreign exchange market. There is no other option.
Everyone is now in demand for currency: enterprises, banks, the population. After the GKO-OFZ exchange, this demand, as already mentioned, will increase by another 15 billion rubles. Moreover, Viktor Chernomyrdin has already announced that he will have to carry out an issue in order to pay off state employees. All this money could potentially end up in the foreign exchange market.
In turn, the supply of dollars is provided exclusively by speculative transactions, as well as the current needs of the population and economic entities. The IMF loan, which may still be given in September, will not help either: Chernomyrdin promised to print money against it to repay 5% of the frozen GKOs and OFZs.
In these conditions, it is impossible to do without a new monetary policy. And Viktor Chernomyrdin has already outlined its contours. In short, its meaning is to ensure that the volume of money supply in the country strictly corresponds to gold and foreign exchange reserves, which in the future will allow the ruble to dollar exchange rate to be fixed. Thus, the Russian government declared itself a follower of the course of economic reforms in Argentina, where, since 1991, the domestic currency (peso) was actually equivalent to the dollar.
Now a little arithmetic. As of August 31, Russia's monetary base was 158.7 billion rubles. By the end of the year, 20 billion will be added to this money (to service domestic debt) and 30 billion (to pay off all debts to state employees). Total about 210 billion rubles. This mass of rubles should be provided in the future by gold and foreign exchange reserves. Now they are equal to $12 billion. So in the worst case (and if the pre-crisis level of tax collection is maintained), the dollar exchange rate by the end of the year could be 17.5 rubles/$. In the best case (if the IMF issues the remaining $18 billion loan and reserves reach $30 billion), the dollar exchange rate will be 7 rubles. But the truth, as usual, lies somewhere in the middle. Judging by the inflation rate since 1994 (when the currency corridor was introduced), the dollar exchange rate today should be 11.6 rubles/$. And this exchange rate value (11.5-12.5 rubles) is now more or less likely - if we take into account not the IMF loans that will fill reserves, but the bankruptcy of the Russian banking system, in which the main reserves of dollars are now concentrated.
But if the government cannot bankrupt debtors and collect taxes from the shadow economy, then we will never see IMF loans. In this case, the government will have to finance all its expenses by issuing the ruble. This means that the dollar exchange rate will be impossible to predict.

VADIM ARSENIEV

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"ARGENTINE" RUSSIAN RUBLE RATE IS 17.5 RUB/$
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Stock market today

3.IX.98 27.VIII. 98 Change, points Change, %

Kommersant stock index,	53,687	58,143	-4.456	-7.66
points
RTS stock index, points	61,430	63,200	-1.770	-2.80
Volume of transactions in RTS*, million $	8,652	27,766	-19.114	-68.84
Capitalization by shares,	11.112	11,430	-0.318	-2.78
included in the RTS index, billion $
Capitalization by shares,	10,643	11,892	-1.249	-10.50
included in the index
Kommersant, billion $

*During the week.

Key money market rates

Rate Date Value, % per annum Term, days

Refinancing	26.VII.98	60.00	—
Pawnshop	27.VIII.98	147.04	4-7
Deposit	03.IX.98	30.00	1
	03.IX.98	40.00	7

Source: Bank of Russia, Ministry of Finance of the Russian Federation.

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Voice of the people

How much is a dollar worth?

Neither the market nor the Central Bank can make a decision regarding the dollar. He now has almost as many different courses as there are quotation places. So how much does it actually cost?

Viktor Ermakov, President of the Russian Agency for Support of Small and Medium Businesses: 15 rubles. But it's not even about the meaning. If the rate is stable throughout the year, it will be possible to plan something and conclude contracts. In the meantime, the rate is fluctuating, no new projects can be started.

Leonid Boguslavsky, manager of Price Waterhouse Moscow: 60 rubles. And this is no longer a joke. Although immediately after August 17, it seemed to me that the exchange rate would stabilize around 16-20 rubles per dollar. But I can’t even name the objective exchange rate of the ruble - we have no idea of the real extent of the disaster.

Mormon Ketiladze, Deputy Director for Foreign Economic Relations and Sales of the Polet watch factory: 13-15 rubles. The course is determined by political rather than economic factors. If the Duma had approved Chernomyrdin on Monday, the dollar would have been worth about 10 rubles.

David Markov, head of the marketing department of the Inkom-Svyaz company (Moscow): The objective rate as of September 2 is 12 rubles. At the same time, I believe that the ruble will fall another half. And in order for us to stop working, the ruble exchange rate must fall fifty times. In general, I remember an anecdote about this. Brezhnev asks the worker:
— If vodka costs 10 rubles, will you buy it?
“I’ll buy it,” the worker answers.
- What if it’s twenty?
- I'll buy it.
- How about thirty?
- I'll buy it. What do I care? One puck for me cost as much as a bottle of vodka, and it will still cost.

Marina Petropavlovskaya, market research manager at DHL: 13-14 rubles. Although I personally like the course that it was before all these events.

Grigory Kulikov, general director of the Miel real estate agency: 13 rubles. For a long time we lived under conditions of an artificially low dollar exchange rate. Today the ruble has already fallen in price by half. It seems to me that this is more than enough. How realistic this rate is depends on how many rubles the Central Bank will draw. He himself is a hostage to his own actions - what he printed is what he received. There are practically no goods left that are not pegged to the dollar. Take a carton of milk from "House in the Village" - it is made using Tetra Pak technology, so it also has a currency component. The natural desire to protect oneself results in the risk being built into the price of the product. The price is calculated at 15 and 20 rubles per dollar. And until the psychosis passes, they will continue to buy at these prices. So what is important now is not so much the exchange rate as stability. I prefer to work on a forecasted market: the main thing is that the rate is finally set.

Pavel Svirsky, president of the Frozen Foods group: 20-25 rubles. In today's situation, I do not see a single limiting factor for the growth of the dollar against the ruble to this level. To be more convincing, you can look at the price of December futures for the ruble in Chicago.

Alexey Ershov, commercial director of the Topaz plant: I don’t know. It is very difficult to answer this question now. What do you want - in this country, no one has fully collected taxes for many years.

Zufar Nasybullin, First Deputy General Director for Finance of Tatneft JSC: At the end of August, we estimated the real value of the dollar at 8.5-9 rubles and at the same time predicted an increase to 15 rubles per dollar. As we see now, we were not mistaken. Today this is the real course.

Lev Daichik, general director of the paging company Mobile TeleCom: Nobody knows this. Personally, I would be quite happy with a rate of 64 kopecks per dollar.

Evgeny Dubrovin, President of Sibecobank (Novosibirsk): As much as the homeland costs. I cannot give an objective dollar exchange rate, because I do not know real exports, foreign exchange reserves and everything that makes up the value of Mother Russia.

Igor Kuznetsov, head of the trading company "Factor": Objectively, it seems to me that the dollar exchange rate is at the level of 15-20 rubles. To understand this, it was enough to simply monitor the situation in the economy over the past two years.

Tamara Boldyreva, General Director of Novosibirsk Cellular Communications JSC: 8 rubles. It is clear that the rate that was a month ago was deliberately restrained by the Central Bank. But I don’t think that 15 rubles per dollar, as it is now, is an effective exchange rate. Objectively, a dollar should cost something like 8 rubles. Although I personally like the rate of 6 rubles.

Artem Bektemirov, general director of the pharmaceutical company Vremya: From 12 to 25 rubles. Now the dollar exchange rate is due to rush demand. I believe that the real exchange rate is 12 rubles per dollar, although within a month it could fall to 25. If the Duma approves Chernomyrdin, this will serve as a stabilizing factor that will stop the decline.

Konstantin Slashchev, head of NCR in Russia: Anyone, it’s not scary. I think no number will scare me anymore. We will work at any dollar exchange rate, as long as it becomes more or less stable - and as quickly as possible.

Alexander Klimov, director of the Siberian Banking Training Center: 20 rubles. Of course, this is a pessimistic assessment. But still within 15-20 rubles. Although if we talk about economics, we have the potential for it to cost 5-6 rubles. Maybe even less, but the economy needs to work. In general, I like a stable exchange rate and such that there are as few rubles as possible for one dollar.

Mikhail Nikolsky, President of the Union of Professional Auditing Organizations: I would be satisfied with a rate of 10 rubles per dollar. The ruble fell so much due to panic and the political situation. More or less, everything will stabilize when a full-fledged government appears, that is, in about a month. Perhaps by the New Year the rate will be somewhere around 12-15 rubles. True, for now this is just a good wish.

Yuri Sherling, Honored Artist of the Russian Federation, Vice-President of Diamant Bank: 30 rubles per dollar. Maybe this will finally show the Russian government how big the shadow economy is in the country.

Mikhail Kislyakov, partner at Arthur Andersen: It’s hard to say. If the ruble is pushed from a certain point, it will roll down. And it will stop when we solve the problem of the budget deficit, production will begin to revive. Then the ruble will reach its real value. But this will not happen soon - at best, in a year.

Modest Kolerov, director of the public relations service of the MFK-Renaissance group: Up to 20 rubles. I am satisfied with the course that, firstly, reflects the real state of the ruble, and, secondly, the rate that will not lead to revolution. I fear that without social measures, a freed-up dollar exchange rate will deal a terrible blow to society.

Sergey Zhidaev, General Director of the Moscow Central Real Estate Agency: The course is not so important for realtors. The main thing is that it is stable. Real estate buyers need a stable economic situation, otherwise no one will invest money.

Vladimir Kalyagin, president of the League of Credit Unions, State Duma deputy: I like the 1991 exchange rate: 64 kopecks per dollar. And I really don’t like the one we have now.

Magazine "Kommersant Money" No. 34 dated 09.09.1998, page 29