RUB stays under pressure near term – Danske Bank

In view of Jens Sorensen, Chief Analyst at Danske Bank, the Russian currency is expected to come under renewed pressure in the short term.

Key Quotes

“The RUB has remained surprisingly solid to the crude price fall. We think that part of the reason is that support carry traders are attracted by the high interest rate differential and many position on a fast rebound of oil price”.

“Yet, the oil price in RUB (the price of Brent has decreased to RUB3,022/bbl this morning from its highest level of RUB3,479/bbl earlier this year) may soon start to become alarming for Russia's Ministry of Finance (Minfin) if RUB does not weaken or crude rebounds any time soon”.

“The current average Brent price for this year in RUB still looks sustainable for Minfin's revenues. Yet, despite the fall in oil price, too strong a RUB on these levels would be a logical trigger for Minfin to purchase more FX in its next monthly plan (due to be announced on 3 April)”.

“Assessing our EUR/RUB top trade, we still see potential in the pair going lower from current levels on EUR weakness as the elections in the EU are set to add uncertainty. A hawkish CBR is also set to keep RUB holders calm, although markets are increasing their expectations of a rate cut on 24 March (we believe it will first cut in June)”.