| The exchange rate of the European currency against the ruble fell by 2% The euro/dollar exchange rate is falling in the same spurts as it recently rose. The value of the common European currency on world markets yesterday fluctuated at $1.2, close to a four-month minimum. This was instantly reflected in Russian quotes: against the ruble, the euro fell by almost 70 kopecks, the dollar rose slightly (plus 3 kopecks). Analysts expect that against the backdrop of positive news about the US economy, the Federal Reserve System (FRS) will raise interest rates by 0.5-1%. If these expectations are confirmed, the dollar may partially restore the positions lost in past months.
The dollar was pushed up by data from the American Institute for Supply Management, which publishes a monthly index of business activity in the service sector (ISM Services). According to information released yesterday, in March the index increased from 60.8 to 65.8 points. According to Bloomberg, this result significantly exceeded the expectations of analysts, who predicted a slight increase in consumer demand in the United States and the growth of ISM Services only to the level of 61.5 points.
Meanwhile, world markets are extremely sensitive to such news. For example, last Friday the dollar rose against the backdrop of data from the American Employment Department, which reported the creation of an additional 308 thousand jobs in the economy (the largest increase since April 2000). “The economy is picking up steam,” said the manager of Boston-based Putnam Investments, noting that the latest news could fuel speculation about a possible increase in the Fed's interest rate, which remains at a multi-year low of 1%.
The situation on world markets also affected the mood of Russian banks. According to the results of morning trading, the official dollar exchange rate (weighted average rate in “tomorrow” calculations at 11.30 am) increased by almost 3 kopecks to 28.5385 rubles. The euro exchange rate automatically rolled down - from 35.1921 to 34.5002 rubles. Thus, the strengthening of the ruble against the euro amounted to almost 2%.
If the expectations of world traders regarding the Fed rate hike are justified, then jumps in the euro exchange rate like yesterday could turn into a trend and the single eurozone currency will confirm its reputation for instability, which it acquired during its rise. Georgy STOLTS |
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