In the past month, the USD/RUB currency pair had stabilized at about 58. Increased crude oil prices have not been able to exert downward pressure. There are several factors that should underpin USD/RUB.
Firstly, foreign investors still have evident reasons to shut Russian assets due to geopolitical risk, noted Lloyds Bank. During financial market stress this could weigh heavily on the ruble. Secondly, Russia’s finance ministry, which intervenes to push USD/RUB higher, benefits from a combination of higher oil prices and weaker exchange rate. Thus, there is incentive for policy makers to manage USD/RUB higher.
Lastly, the central bank is expected to keep its easing cycle as Russia’s headline consumer price inflation continues to fall. Lower interest rates would make the ruble less attractive from a carry perspective, especially as the U.S. Fed continues to tighten policy.
“We forecast USD/RUB at 61.0 at end-2018”, added Lloyds Bank.
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