Currency Forecast - BYR: Weakness Ahead In 2016 - SEPT 2015

BMI View: We expect some strength in BYR against USD over the remainder of 2015 as oil prices stabilise, but forecast steady depreciation over a longer term time horizon. A weakening Russian rouble and low reserve stockpiles will necessitate the central bank to allow further depreciation from overvalued levels in order to maintain external account stability.

Short-Term Outlook (three-to-six months)

We have revised our average and end-of-period forecasts for the Belarusian rouble (BYR) in 2015 and 2016 to reflect a faster pace of depreciation against the US dollar. The BYR/USD exchange rate tends to track that of the RUB/USD, which has depreciated significantly in recent months due to a renewed downturn in global energy prices. The Belarusian rouble is managed against a currency basket consisting of RUB (40%), EUR (30%) and USD (30%). As such, movements in RUB have a greater impact on the BYR/USD rate. In addition to this, RUB depreciation has sparked fear among Belarusians of another devaluation, prompting many to accelerate conversion of BYR into USD. These combined forces, along with a general EM FX sell-off, have weighed on the BYR, pushing it to all time lows of BYR17700/USD. While short-term pockets of BYR strength are likely as Brent crude prices stabilise in the rest of 2015, Belarus' close economic links with Russia will ensure a steady depreciatory path beyond 2015.

RUB Still The Main Driver
Belarus - BYR Currency Basket and BYR/RUB Exchange Rate
Source: NBRB, BMI Calculation

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