Fed’s Logan Signals 50 Basis Points More in Rate Hikes 
Global Markets React to Strong U.S. Jobs Data and Rising Yields 
Fed May Resume Rate Hikes: BofA Analysts Outline Key Scenarios 
Fed’s Williams Sees One More Rate Hike in 2026, None in 2027 
China’s Growth Faces Structural Challenges Amid Doubts Over Data 
Fed’s Hammack Says Bond Yield Surge Is Not Driven by Inflation Fears 
Visa Wins China Approval to Prepare Domestic Payments Expansion 
RBA Set for September Rate Hike as Inflation Stays High 
Goldman Predicts 50% Odds of 10% U.S. Tariff on Copper by Q1 Close 
BlackRock’s Rick Rieder Favors Bonds Over Stocks as Treasury Yields Surge 
2025 Market Outlook: Key January Events to Watch 
ECB May Stop Rate Hikes After December, Capital Economics Says 
Add as a preferred source on Google
Recently, the Russian central bank (CBR) announced that it was officially suspending FX purchases on behalf of the finance ministry until the end of this year; it added that it may resume FX purchases in 2019 but the issue was open. CBR deputy governor Ksenia Yudaeva summarised a few other points – for example, that CBR sees 6%-7% as the equilibrium interest rate for Russia medium-term, but considers the current 7.5% as neutral because of elevated risk premium from sanctions.
RUB seems undervalued and the suspension of the FX purchases on behalf of the budget rule could lead to a convergence to fair value. The budget rule has proved extremely effective in decreasing RUB’s beta to oil and complicates fair value assessments which rely on historical regressions.
In our preferred methodology, our BEER FV model relies on a weighted average between the current oil price (1/3 weight) and the budget oil price (2/3 weight; $42.8pb Brent). This is most consistent with the “theoretical impact” of the budget rule, in our view. Such an adjustment to the model leaves RUB currently 8.3% cheap to FV.
However, with the CBR extending the pause in its FX reserve accumulation program until year-end, oil could have a more pronounced impact on RUB in line with historical betas. Relying on actual oil prices (with no budget rule adjustment), would show RUB as substantially undervalued, by around 16% (refer above chart).
Importantly, the full current account surplus (6.6% of GDP in Q2 2018) can now directly support the currency. We estimate CBR will over the full period of the suspension forgo about $27bn of FX purchases. However, considering substantial and unpredictable geopolitical risks, we would recommend to rely exclusively on option exposure for RUB appreciation plays.
Buy 3M USDCAD 25D call vs sell USDRUB 25D call, in 1.8:1 vega. Oil hedged EM – DM vol compression RV with NAFTA edge.
At spot reference: 66.595 levels, 06-Nov-18 USDRUB 1x1 put spread (69.36/64.14) is advocated. Courtesy: JPM
Currency Strength Index: FxWirePro's hourly USD spot index is inching towards 83 levels (which is bullish), while articulating (at 13:44 GMT). For more details on the index, please refer below weblink:
