FXStreet (Edinburgh) – Analysts at BAML reiterated its negative stance on the Russian currency.
Key Quotes
“A surprising twist in CBR policy was the emergence of a completely new goal to boost FX reserves to the $500bn level. According to the CBR, that level is “comfortable” from a financial stability perspective and should be achieved within a 5-7 year horizon. The CBR also stated that such an effort should not compromise the existing inflation targeting mandate, which remains the primary goal for the CBR”.
“However, we believe the CBR’s new FX reserves policy goal might soon become an important inflationary risk that at some point might start to constrain the potential for further rate cuts in 2016 and 2017, even despite the likely low inflation”.
“Both RUB and local bonds have room for further consolidation, in our view. CBR actions and commentary clearly indicate diminished scope for RUB gains and there is scope for some disappointment on sanctions at the June EU review. Upcoming negotiations with Iran also pose a risk to oil and RUB”.
(Market News Provided by FXstreet)