Global currencies await Trump's decision

Nikita Maslennikov: 100% tariffs could be a "black swan" for many economies

On the night of July 31, the Russian Central Bank significantly reduced the dollar exchange rate on August 1 by more than 1.5 rubles, to 80.31 rubles. The euro fell by more than 3 rubles, with the Brussels currency (euro) reaching 91 rubles. On August 2, "the dollar" rose slightly by 1 kopeck. "The euro" had a slightly higher increase, at 91.7 rubles.

For nearly half a year, the dollar has not been doing well. In the context of new US trade policies, its exchange rate against the euro dropped from about 0.97 at the start of the year to 0.88.

Nikita Maslennikov, chief expert at the Political Technology Center and an economist, recalled in an interview with "Svobodnaya Pressa" that during the waiting period for the US government's tariff orders, the dollar's exchange rate against the ruble remained relatively strong.

"But since the early morning of August 1, when President Donald Trump signed the documents, the situation changed, which also affected our market. Due to some degree of certainty obtained by participants in different financial markets, the dollar began to weaken."

The tariff rates for 68 countries, regions, and the EU that came into effect on August 7 range from 10% to 40%, although most economies will face rates of 15%-20%. Previously, the number of US trade partners involved was higher (Trump announced that from April 5, tariffs on at least 185 countries would be increased to 10% - "Svobodnaya Pressa"). This is either a technical error or simply a threat.

The list of trade partners that will be subject to additional tariffs has now been determined. However, the US has not yet fully reached an agreement with Mexico, Canada, and China, but there are no additional tariffs on China, only some technical issues. Details of the agreement between Washington and Brussels are unclear, which naturally affects the exchange rate relationship between the dollar and the euro.

"Svobodnaya Pressa": Why is the ruble strengthening against major currencies?

"There is some certainty about the situation in the coming months, which provides a basis for some new currency combinations. In addition, due to the shortening of the suspension period to 10 days by Trump, the dollar and euro have been overbought in the Russian market recently.

Currently, these currencies are retreating, and the situation is stabilizing. It is unclear what will happen on August 8. But given that demand for the dollar and euro has not increased, our market has reacted in this way."

"Svobodnaya Pressa": What might the Russian currency exchange rate be?

"In the coming months, the dollar exchange rate will fluctuate between 79 and 83 rubles, but the fluctuations may be large and recurring."

For the Russian market, an important factor will be the expectations of budget parameters. Assessments indicate that the 2025 budget deficit could reach about 3% of GDP, approximately 6 trillion rubles (according to the latest bill version, it is 1.7% of GDP - "Svobodnaya Pressa"). If we attempt to reduce the deficit, we will face increased government borrowing through federal loan bonds (OFZ). Although this has not yet fully manifested, it is already a concern.

A weaker ruble will also accompany falling oil prices. The Russian Central Bank recently reduced its annual price forecast for Urals crude oil from $60 to $55 per barrel. According to the 18th set of EU sanctions, the price ceiling has been lowered to approximately $47.6 per barrel (the US, Canada, and Australia, which participated in the first $60 per barrel price ceiling, did not join the new ceiling - "Svobodnaya Pressa"), which has already led to a significant increase in oil transportation freight costs.

There are differing long-term predictions about the dynamics of the ruble exchange rate, but it is more likely that by the end of the year, the dollar to ruble exchange rate will be in the range of 87-90 rubles. Perhaps at some point, the dollar to ruble exchange rate will exceed this range. However, each day's currency combinations will change according to news developments.

In addition, our market has not yet digested many news items. For example, on the morning of August 1, S&P Global reported that the Russian manufacturing Purchasing Managers' Index (PMI) fell from 47.5 to 47 points in July.

"Svobodnaya Pressa": Could imposing 100% tariffs on economies that purchase Russian oil become a "black swan" event?

"Yes, for many countries. This could trigger a series of negative factors for several countries (including China). However, how fast this process will be and what local small shocks will accompany it is unclear.

The US needs China to reach a comprehensive trade agreement very much. Therefore, imposing 100% tariffs is not very consistent with this trend. If implemented, the global economy will suffer a very serious impact, and exchange rates will also be affected."

"Svobodnaya Pressa": Is it necessary for Trump to lower the value of the dollar to support exports?

"This is more of his wish. If the dollar depreciates, inflation in the US will start to rise. Since January 1, the dollar has depreciated by about 8% in nominal terms. At the same time, the US inflation rate has risen from a low of 2.3% in April to 2.7% in June."

In June, the Federal Reserve raised its 2025 inflation forecast from 2.7% to 3%. This is currently a moderate prediction, but it indicates that adjustments may be needed. This occurs at a time when the US is almost close to its target inflation rate of 2%.

Additionally, a depreciation of the dollar cannot solve the trade imbalance. The US cannot quickly expand its exports. Trump has his own rhetoric, but economic reasons are largely another matter. He first makes statements, and then makes certain adjustments after consulting with his economic advisors and assistants. Therefore, it is not ruled out that similar situations may occur after the 10-day suspension period ends.

However, overall, August will be a month of increased volatility for currencies, including the ruble. This largely depends on the speed at which Congress passes the tariff bill targeting Russian energy importers, whether it will pass, whether Trump's position will change, and how the geopolitical situation will develop.

Original: https://www.toutiao.com/article/7534621142829531702/

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