FXStreet (Edinburgh) – Strategist Piotr Matys at Rabobank sees the Russian ruble losing further ground in the next months.
Key Quotes
“The rouble rallied 21% against the US dollar and almost 34% against the euro when Brent crude produced a strong recovery from the six-year low earlier this year”.
“The world’s former best-performing currency for 2015, however, ran out of steam when the rebound in oil prices started to fade and the Central Bank of Russia resumed FX purchases in May”.
“While the official purpose of buying up to USD 200mn per day is to replenish FX reserves, the CBR has de facto been managing USD/RUB within the corridor, which until very recently was defined by the resistance area at 58.50-59.25 and the lower boundary at 50/48”.
“This unofficial trading corridor fitted a dual purpose of preventing the rouble from appreciating excessively against the US dollar (in order to maintain the competitiveness of Russian exports) and to keep inflation on track to ease further in the coming months”.
“Given that a sharp increase in USD/RUB well above the 60-level could reignite inflationary pressures, the CBR has now suspended its daily FX purchases. The move by USD/RUB above the 60-level also likely explains why the central bank opted for a measured rate cut of 50bps on July 31”.
“Conversely, it is likely that Governor Nabiullina would be prepared to cut rates by 100bps or perhaps more if USD/RUB were again leaning on the 50/48 threshold. Currently USD/RUB looks set to hover at the upper boundary of the corridor in the coming weeks in view of the pressure on Brent crude, given China growth concerns, and expectations of a Fed rate hike later this year”.
(Market News Provided by FXstreet)