The right balance between commodity dependence and external imbalances.

The evolution of net commodities exports and current account balance (as % of GDP) between 2013 and 2015 (the second leg of the commodity rout).

We observe that: - Most commodity exporters had a current account deficit in 2013, except Norway and Russia. Norway saw its net exports of commodities in USD value almost halved since 2013, but still managed to maintain an external surplus.

Meanwhile, the country was able to delink the annual budgets from commodity-linked income. Russia also saw a decrease in the USD value of its commodity exports, but the IMF expects the current account balance for 2015 at +5.2%, a jump from +1.5% in 2013.

USDRUB is not moving anywhere from its long lasting range of 67.3629 on north and 61.8335 on south despite turbulent news across the globe. We don’t think the results of the US elections have caused much resilience in the medium run, (you can probably read that in weekly charts of this pair).

Well, incorporating the FX dimension to changes in the current account balance and net commodity exports from 2013 to 2015, Russia may benefit significantly from the better outlook on growth, as well as oil prices, which may have finally found a floor.

Russia’s key macro figures for September released by Rosstat are likely to further substantiate the CBR’s preference to reaffirm its hawkish monetary policy guidance, keeping the key rate at 10% until at least end-2016. Moreover, should Brent hold up well relative to non-oil commodities (notably, industrial metals), the risk of souring sentiment triggered by China’s slowdown might take less of a toll on Russian assets.

At spot ref. 63.5080: we still like to continue with the same recommendation either long in 2m/1w diagonal USDRUB put spread or shorts in near month futures, the RUB recovery now look too extended for a put position vs. the USD as from current levels we see only contained the further potential for RUB gains.

A 65.5/61.75 diagonal put spread is likely to fetch for certain yields of the USD notional as it edges above up to higher strikes in next 1 week or so and slides as much as possible up to maturity on longs.

The risk is dubiously unlimited in shorts, the structure should benefit from a further compression in RUB volatility in a bullish scenario.