Dollar's prestige falls among Russians

By Yekaterina Dranitsyna
St. Petersburg (Russia) Times
Tuesday, January 16, 2007

http://www.sptimesrussia.com/index.php?action_id=2&story_id=20047

Russians are increasingly losing confidence in the U.S. dollar, experts from the Public Opinion Foundation said last week as it published its report, "The Dollar in Russia."

"In recent years the dollar in Russia has lost significantly more in prestige than in real exchange value," POF's Grigory Kertman said.

In 2002 a poll showed that 35 percent of Russians trusted the dollar more than the ruble and the euro while 37 percent said they preferred the ruble. About 11 percent of respondents preferred euros.

"Since then the situation has changed dramatically. Today almost two-thirds of respondents -- 63 percent -- say they trust the ruble most of all, while only 5 percent trust the dollar and 15 percent the euro," Kertman said.

The data is based on a poll conducted at the end of December in 100 Russian cities with 1,500 respondents.

Elderly people demonstrated the highest loyalty to national currency. About 75 percent of respondents over 54 years old prefer the ruble, with only 2 percent preferring the dollar and 3 percent the euro.

Most young people (51 percent) trust the ruble with just 8 percent believing in the dollar and 26 percent backing the euro, the POF report said.

The decreasing value of the dollar against the ruble worries only 10 percent of respondents. Savings in dollars as a cause of nervousness was indicated by only 1 percent of people. About 1 percent of respondents said their current income depends on the dollar rate. Only 32 percent of respondents said they monitor the dollar exchange rate and 71 percent of people said they are definitely not worried by the dollar exchange rate -- mainly because they do not have dollars.

Seventy-seven percent of respondents said that a decrease in dollar value would not affect their welfare. Four percent said they benefit from the decreasing dollar rate while 8 percent claimed the opposite.

As for possible effects on the Russian economy, 51 percent of respondents were unclear. Seventeen percent of respondents denied any correlation between the dollar rate and the Russian economy, while 18 percent believe that decreasing the dollar’s value could negatively affect Russian economy.

About 23 percent of Russians expect the dollar rate to remain relatively stable this year. Twenty-one percent expect it to keep decreasing, while 4 percent, on the contrary, expect the dollar to gain against the ruble. The rest refused to make any forecasts.

In everyday life dollars also are becoming increasingly rare. Sixty-six percent of Russians said they never used dollars. Two-thirds of people who had used dollars said that in the last two to three years they came across the greenback less often than before.

Only 4 percent of respondents said that they deal with dollars more frequently than before. Seven percent said that nothing has changed.

Denis Mukhin, analyst for banks and currency markets at BrokerCreditService, said that, considering currency market trends in 2006, ruble deposits were preferable to euro deposits and that these were preferable to dollar deposits.

However, he said, whatever the currency, all deposits provided negative real profitability. He estimated profitability of ruble deposits at about -0.1 percent, which is the best result among the ruble/euro/dollar group.

"Considering the economic environment in the United States and the eurozone and the Central Bank's activities, next year the dollar rate is likely to keep decreasing. Maybe not so fast as in 2006, but still it will decrease," Mukhin said.

Mukhin forecasted that the Central Bank will follow the same policy and the ruble will continue to strengthen.

"Although the profitability of ruble deposits could decrease still further, it would be most worthwhile to choose ruble deposits. I mean in terms of saving, not in terms of making profit," Mukhin said.

According to Interfax-TsEA, last week the dollar exchange rate increased by 24 kopeks to 26.59 rubles "due to positive macroeconomic data on the American labor market published on Jan. 5."

Employment level and average hourly wages in the U.S. increased faster than the experts expected while foreign trade deficit decreased to $58.2 billion.

This week Interfax-TsEA expects the dollar to continue its growth to 26.66 or 26.67 rubles, Interfax reported Monday.

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