A Strong Dollar Will Not Last Long

The Russian Finance Ministry refuses to support dollar

Good news for the dollar: the ruble exchange rate has dropped by nine kopecks against the dollar, according to the results of a joint trading session of the Moscow Inter-Bank Currency Exchange (MICEX). On June 4th the Bank of Russia announced the official dollar exchange rate to be on the level of 3074 rubles per one USD. This information was provided by the public relations department of the Russian Federation Central Bank.

The European currency gained almost 25 kopecks on June 3rd. One euro costs 36.20 ruble.  The Bank of Russia announced the official euro exchange rate against the ruble on the level of 36.13 rubles.

Specialists say that the dollar is rebounding. Yet, all the specialists are certain that this will not last long. They say that the dollar does not have any reason to strengthen against the Russian ruble. Which is why, experts believe, the dollar is destined to drop in the future anyway.

The pressure on the dollar is too high in Russia: Russian companies' export profits are growing, while the demand for dollars on the part of domestic importers is not large. It is no wonder that European imports dominate in Russia, and importers need the European currency. This is the reason why the euro has been growing in Russia lately.  Secondly, Russians have been disappointed by the instability of the American currency. Before, Russians would rush to buy cheap dollars, but nothing like that is happening at present. Therefore, the absence of the mass demand on the part of the population also makes the dollar become cheaper.

Furthermore, the Russian Central Bank has stopped buying dollars on the home market. It seems that the bank is not going to resume its support of the American currency until autumn, at least. The Central Bank is afraid of uncontrollable inflation, which might ruin the consumer market in Russia. Apparently, there is another relevant reason to refuse from supporting the dollar as well: The Russian foreign debt, which is basically evaluated in dollars, has become cheaper as well, due to the diminishment of the American currency.

At present, the Russian Finance Ministry collects rubles to make all its payments. The cheaper the Russian dollar debt, the better. This is a good reason to give up supporting the American dollar for a while.

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Author`s name Olga Savka