USD/RUB likely to trade around 62.5 by end-2017, says Lloyds Bank

The decline in crude oil prices in the past month resulted in the USD/RUB pair to come in at its low of 55.08. In the future, a combination of easy monetary policy and the requirement to rebuild both foreign exchange and central government reserves might push USD/RUB higher, even if crude oil prices eventually rebound.

The Russian finance ministry has pulled back on the size of foreign exchange purchases; however, this also shows less of a requirement to intervene because of a relaxed market buying pressures. However, relaxed intervention has coincided with more than anticipated 50 basis points cut to the CBR’s key rate to 9.25 percent.

Moreover, the Central Bank of Russia has hinted at its plans to further ease monetary policy during its next meeting in June. The bank’s guidance continues to show that the “neutral” interest rate for the economy is between 2 percent – 3 percent. Thus, the risks are skewed to more aggressive policy easing in the near future, noted Lloyds Bank.

“We forecast USD/RUB will end the year at 62.5”, added Lloyds Bank.