Experts have told how the CBA affects the carry trade and the exchange rate
Active reduction of the key rate of the Central Bank of the Russian Federation in recent time reduces the flow of funds in ruble-denominated financial instruments in the framework of the carry trade, according to respondents RIA Novosti experts. Among other things, this puts pressure on the ruble, the experts believe.
Carry trade is the investment strategy of gaining profit on the Forex market due to different interest rate. In particular, it could be sale of currency (dollars, Euro, on which the fed and the ECB keeps rates near zero) and the purchase of these funds for ruble-denominated financial instruments that are profitable. Such actions of investors lead to higher supply of foreign currency on the Russian market and, accordingly, to the strengthening of the ruble.
Polled by RIA Novosti analysts believe that the regulator on Friday will again lower its key interest rate, but they are unable to agree upon step reduction: the Board of Directors will select a neat 25 basis points or a bolder 50 basis points. In June, the Central Bank on the background of low economic activity and slowing inflation for the first time in 2015 reduced the rate by 100 basis points to a historic low of 4.5% per annum.
Currently, the inflow of funds in ruble-denominated instruments through the channel carry trade has virtually dried up: investors wary ahead of a significant volume of OFZ placement, says the Director of analytical Department IK "Region" Valery Weisberg. In total over the past two to three months the volume of purchases in the framework of the carry trade does not even reach $ 1 billion, he estimated.
Currently active inflow of ruble assets in the framework of the carry trade from the residents there, although the attractiveness of long-term OFZs and stored, also says the head of the center of development strategies of Gazprombank Yegor Susin.
It is possible to estimate the global inflow of funds in Russia in the framework of the carry trade, using the data in the OFZ market. With the beginning of the year was placed OFZ 1.74 trillion rubles. Even if you strongly limit the concept of carry trade speculative opportunity for foreign investors to earn the difference in interest rates, the volume of such investments is significant, the analyst of the company "freedom Finance" Evgeny Mironyuk.
The total volume of the OFZ market is about 10 trillion rubles, and the share of non-residents - about 30%, says the expert on the stock market of the company "BCS" Dmitry Babin.
One of many factors weakening of the Russian currency in the second half of June - beginning of July was excessively sharp reduction of the key rate of the Central Bank, which reduced the difference in profitability of the Russian and foreign debt securities, believes Mironyuk of "freedom Finance".
Though the yields in developed bond markets are near zero or below, they remain unchanged and are unlikely to get any lower, so reducing the yield of OFZ after the expected lowering of the key rate of the Central Bank reduces the difference of the rates between us and foreign markets, making government securities of the Russian Federation less attractive from the point of view of the ratio risk/return, says Babin from the company "BCS".
This puts pressure on the carry trade and could increase the net outflow of funds in the framework of these transactions, he added.
In such a situation we can hardly expect the flow of funds on the Russian market in the framework carry trade and the ruble may be under slight pressure in the summer and autumn, summed up Cousin from Gazprombank.