May Reversal: What To Expect From The Dollar Exchange Rate

This week's forecast.

Last week, the Belarusian foreign exchange market continued the trend towards strengthening of the national currency exchange rate. But at the end of the week, a possible reversal of the fx rate appeared at the fx trading. What rates to expect and how the Belarusian currency market will behave at the end of May, explains in the traditional review myfin.by financial analyst Mikhail Grachev.

At the end of the week, the U.S. dollar exchange rate on the domestic market decreased by -0.11%, and on Friday, May 22, the BSE trades closed with a quote of the USD/BYN currency pair at 2.7506. Although at the beginning of the week, on Tuesday, May 19, the dollar exchange rate declined to USD/BYN 2.7293 (-5.97% YoY). It's possible that the decision of the National Bank of Belarus on May 20 to lower the refinancing rate by -0.50 p.p. played its role. The trading volume of the U.S. dollar on the Belarusian Currency and Stock Exchange against this background reached the maximum value of $150.621 million this year.

The rate of the Russian ruble rose by +1.14% at the same time on the Belarusian fx market, and the ruble has already grown by +4.12% against the beginning of the year. Last week closed at RUB/BYN 3.8586 per 100 Russian rubles, which is generally in line with the forecast. The trading volume for the week was above average with the value of RUB 27,247.32 million, or approximately USD 382.23 million in equivalent.

The factors influencing the domestic currency market are still the same - the overhang of foreign currency on the Russian financial market in conjunction with the approaching peak of tax payments on May 28. Against this background, the U.S. dollar exchange rate in the Russian financial market at one point declined to USD/RUB 69.94, but by the end of the trading week returned to the value of 71.50.

Dollar reversal

At the same time, the currency market, both Belarusian and Russian, may have seen a reversal. We are now talking about the US administration's attempts to come to a long-term settlement of the Middle East conflict.

The two sides - Iran and the US and its allies - insist on their vision of a solution to the problem, but a consensus is gradually being sought, which will eventually lead to the signing of a full-fledged document. At the very least, this is indicated by the sharp decline in the price of oil by the end of last week (Brent rolled back to 103.6 USD/br) and the stabilization of the gold price around 4550 USD/Oz. Of course, these are still the first signs of dawn, but when the day comes, the market will move.

For now, the support factors for the ruble remain in place. Some correction is possible, because for the Russian budget the dollar below 70.0 rubles significantly reduces the revenue part. Hence, it is not excluded that with the beginning of June the Russian Ministry of Finance will significantly increase the volume of currency purchases in the domestic market. In this case, the dollar exchange rate will move to the upper boundary of the current corridor of Br75.0, while the Belarusian market may return to quotations around USD/BYN 2.850.

Weekly Forecast

If the negotiation process ends in a fiasco and returns to the hot stage, the oil price will automatically soar to historical highs and higher. But there is a suspicion that this scenario is unlikely, as the current prices for "black gold" have already led to the unwinding of inflationary processes in the United States, and this pushes the US Federal Reserve to raise interest rates. This development does not fit in any way into the Trump administration's plans for monetary policy easing, which is expected from the newly appointed head of the Fed Kevin Warsh.

Thereby, this week, special attention is paid to the settlement of the conflict in the Persian Gulf. At the Belarusian currency market, a further pullback of the dollar rate from the annual minimum to USD/BYN 2.825-2.835 is possible. The Russian ruble is slightly losing ground.

You can support the website Charter97.org

MULTI-CURRENCY ACCOUNT FOR ASSISTANCE:

Bank's name: Bank Millennium S.A.
Address: ul. Stanislawa Zaryna, 2A, 02-593, Warszawa
IBAN: PL97116022020000000216711123
SWIFT: BIGBPLPW
Name of the account holder: Fundacja “KARTA ‘97”
Purpose/title of payment: Donation for statuary aims

You can contact us by the e-mail [email protected]