Translated material
On an inclined plane
The dollar is losing ground
Yesterday, many exchange offices did not give even 25 rubles for a dollar. The official exchange rate of the American currency dropped to 25.1258 rubles. On international markets, the dollar is also going down, and the euro is already worth more than $1.4. Analysts note that there are almost no factors on the Russian market that could support the dollar, and international investors are waiting for data on inflation and the labor market.Compared to the previous day, the dollar fell by more than 6 kopecks, and over the past eleven sessions - by more than 53 kopecks. At the same time, the ratio of the European and Russian currencies has not changed. The official cost of one euro for the second day is 35.21 rubles.
In many Moscow currency exchange offices, for transactions with small amounts, the dollar amount was already less than 25 rubles. According to Interfax, Master Bank purchased American currency for 24.9 rubles, Sovincombank and Credit Europe Bank for 24.95 rubles, Investment Union bought currency in the amount of up to 1 thousand dollars for 24. 12 rubles, from 1 thousand dollars - for 25.02 rubles. However, in a number of banks the rate remained above 25 rubles. Thus, B&N Bank bought dollars for 25.05 rubles, Navigator for 25 rubles, Mezhtrust for 25.01 rubles. Despite the sharp drop in the dollar, there were no queues or excitement at the exchange offices.
On the international market, yesterday the euro exchange rate exceeded $1.4 for the first time in history. Over the course of the day, the dollar dropped to 1.404 (on Wednesday it stood at 1.399). The reason for the continued dollar sales remains the decision of the Federal Reserve System made on September 18 to reduce the base rate by 0.5 percentage points, to 4.75% per annum.
Analysts noted that if the dollar goes below 1.4, the political disputes around the exchange rate will intensify. “With the dollar approaching such a sensitive level, the course of monetary policy in Europe may well change in the last quarter of this year,” said Bank of New York Mellon analyst Simon Derrick. “Following recent comments from French President Nicolas Sarkozy, it is not surprising to hear more talk from the eurozone about the shock a strong euro is causing to European exporters.” As is known, Mr. Sarkozy accuses the European Central Bank of creating favorable conditions for speculators and being overly concerned about inflation. He calls on the financial regulator to focus on economic growth and employment and lower the eurozone policy rate to help exporting companies. However, the calls of the French leader met with a firm rebuff from the ECB leadership, and at the meeting on September 6, the base interest rate was kept at 4% per annum. However, Mr. Sarkozy is not giving up and promises to fight the way Europe solves financial problems.
The decision to cut US interest rates showed that the Fed has set its main goal to support the US economy, which has suffered from the credit crisis caused by the problems of the subprime mortgage sector. At the same time, yesterday Fed Chairman Ben Bernanke called on Congress “not to undermine market discipline” by raising the ceiling on loans that can be purchased by government mortgage agencies Fannie Mae and Freddie Mac. As you know, congressmen are proposing to raise the loan limit from the current $417,000. “By removing restrictions on investments, we will thereby increase the implied guarantees in the mortgage market, further undermining market discipline,” Mr. Bernanke said.
Meanwhile, the market expects the Fed chairman to continue liberalizing monetary policy. Rate futures indicate that the Fed has a 76% chance of lowering its key rate again at its next meeting in October and is on track to cut rates to 4-4.25% by mid-2008.
“Many market participants were hoping for a decline of 25 basis points, in which case the dollar would have maintained its previous positions,” notes Yuri Sedykh, a dealer at the Russian Development Bank. -- All investors' attention would then be focused on the comments of the Fed leadership. However, reducing the rate by 0.5 percentage points at once could not help but cripple the dollar.” In his opinion, the dollar will now be supported by inflation data. If it is high enough, it will play into the hands of the American currency.
“There are fewer and fewer factors that could support the American currency in the dollar-ruble pair,” continues Mr. Sedykh. “High oil prices are expected to continue.” According to his forecasts, at around 25 rubles. The dollar may settle before the end of the year.
The head of the Ministry of Economic Development, German Gref, approved yesterday the actions of the American monetary authorities, saying that the Fed's decision had a positive impact. “We are sensitive to what is happening in the field of monetary liquidity and supply,” he said. “We are not concerned about the situation in the money market and in the Russian banking system in general. Everything is under control and stable.”