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Fear factor: How coronavirus changes the dollar

UNITED STATES (OBSERVATORY NEWS) — The panic around the coronavirus contributed to the appreciation of the dollar against the ruble. Now a new trend has emerged in the foreign exchange market. Life understood what factors affect the dollar and what will happen to the exchange rate in the near future.

On February 19, for the first time since the start of the epidemic in China, the number of patients cured per day exceeded the number of new infected. This is perhaps one of the few positive news about the epidemic. The situation remains tense.

Chinese citizens were temporarily banned from entering Russia, and Chinese business suffers serious losses. Against this background, the situation in the foreign exchange market remains tense. For a month, the dollar went up by three rubles. This was facilitated by panic in the markets. Now, it seems, the American currency is starting to lose ground again.

“In March and April, two interdependent factors will influence the ruble exchange rate – the coronavirus epidemic and oil quotes,” says Artem Deev, head of the AMarkets analytical department. – The Russian economy is closely connected with the economy of China, which supplies us with more than 20% of goods of various groups. Due to closed borders between countries and powerful quarantine, trade suffers losses, which will negatively affect the growth rate of the PRC economy and lead to a drop in the exchange rate of developing countries. Relevant data will be published in March. If the decline turns out to be significant, it may drop the Russian currency at the level of 64–66 rubles per dollar.

At the moment, the situation has stabilized, says leading analyst at Forex Optimum Ivan Kapustinsky. According to him, this can be seen in one of the most important drivers of the Russian currency – oil quotes. Over the past week, they have grown from $ 53 to $ 58 per barrel of Brent brand.

Fear factor How coronavirus changes the dollar
File EPA

“The course was also positively affected by the fact that on February 19 (for the first time since the epidemic began in China), the number of patients treated per day exceeded the number of new infected patients – by more than 100 people,” continued Artyom Deev. – However, quotes are very far from the beginning of January. The epidemic is exerting powerful pressure on the global economy, and China has already reduced daily oil consumption by a third.

Indeed, it is still difficult to formulate adequate assessments of the impact of the viral factor on the global economy and markets. This opinion was expressed by the chief analyst of BCS Premier Anton Petkovich. On the one hand, it is obvious that the “viral” history stretches over time – it was not possible to quickly neutralize the disease. On the other hand, the mortality rate of the disease remains relatively low, and the growth rate of the number of cases continues to decline, while the number of patients recovered is actively growing.

“As a result, markets remain in a state of uncertainty, which leads to quite sharp fluctuations in quotations both on stock exchanges and on foreign exchange markets,” explains Anton Petkovich. – Nevertheless, investors remain far from any panic. We do not observe a large-scale exodus of investors from risky assets. Under these conditions, the ruble manages to maintain stability – ruble assets, especially debt securities, remain one of the most attractive for foreign investors. Also, the Central Bank at the February meeting gave the markets a fairly clear signal of its willingness to continue to reduce the key rate. It also works in favor of maintaining the demand of foreigners for ruble assets.

According to Anton Pokatovich’s forecasts, nothing threatens the stability of the ruble in the near future. True, he makes a reservation – if there are no negative shock phenomena on the world markets or in the global economy (for example, the coronavirus will not spread at an accelerated pace outside of China). If in the next month and a half the viral fears of the market decline, the rate may temporarily return to the range of 61–63 rubles per dollar. In the longer term, two to three months, Anton Petkovich expects the exchange rate to be in the range of 62–65 rubles per dollar.

“ There is still a small possibility of a more rapid than expected spread of this disease,” says Ivan Kopeikin, a BCS broker expert. – If this scenario is realized, then all risky assets (including the ruble) will be under serious pressure. The immediate goal in this case may be the rate of 65.5 rubles per dollar. However, the base scenario is more likely.

According to the forecasts of Ivan Kopeikin, if there is no aggravation of the epidemiological situation, the dollar will return to the mark of 63 rubles. If it is possible to break through this level, the US currency will continue to decline to the area of ​​62.2. In this scenario, the key positive role will be played by the stimulating actions of world central banks, as well as the possibility of OPEC + to further reduce oil production.

“Donald Trump is trying hard to lower the cost of the dollar to make life easier for American companies,” said Arseniy Dadashev, director of the Academy of Financial and Investment Management. – Given how he fulfills other promises, he can succeed sooner or later. As a result, the ruble may strengthen to the level of 62–62.5 per dollar.

In general, now the position of the dollar on the world stage is quite strong. According to many analysts, it is much better than the euro. According to Arseniy Dadashev, investors should not consider savings in euros, since the EU economy, unlike the United States, is highly dependent on exports and is sensitive to problems in China.

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