FxWirePro: Cost-effective structure to capture a RUB correction – Use 3m forwards

Beware a RUB correction Are you concerned that RUB positioning is too heavy, stagnant price action is a warning sign, fundamentals could turn, and a significant correction could happen? We are. In the recent past we’ve recommended going long USDRUB as the ruble had approached tipping point, looking for a move to 61.30 in the next three months, based on domestic factors. We have a constructive view on EM assets, and our portfolio of trade recommendations is long FX carry trades (ZAR, MXN and TRY). However, our exposure has been selective, and we have shied away from short dollar risk in the BRL and RUB in recent months.

Rouble stabilized owing to cross boundary risks: Rouble tumbles over 1 pct due to the lingering risks from Trump’s administration. The safe-haven yen climbed against the dollar and euro on Friday and the rouble tumbled, after the United States launched cruise missiles at an airbase in Syria, raising tensions with Russia.

Among the biggest foreign policy decision of his presidency so far, Donald Trump ordered the move after a chemical weapons attack killed at least 70 people in the recent past. It catapulted the United States into a confrontation with Russia, which has military advisers on the ground assisting the Syrian government rouble skidded around 1 pct RUB, putting it on course for its biggest one-day falls in a month. Hence, using 3m forward exchange contracts to staying long in USDRUB would serve as a smart hedge for the portfolio with high yielder exposure.