On Tuesday, USD/RUB fell to a fresh year-to-date low of 70.82 after convincingly falling through the previous low (71.55) seen in the middle of June. Economists at Credit Suisse stay constructive on the rouble and lower their short-term USD/RUB target to 68.00 (from 72.00 previously).
Rouble to continue to benefit from declining political risk, elevated carry and a positive terms-of-trade shock
“Now that USD/RUB has fallen convincingly below our previous short-term target of 72.00, we lower that short-term target to the low-end of our Q4 range – i.e. to 68.00. Our rationale remains that the rouble will continue to benefit from falling political risk and elevated carry. Additionally, the recent rally in oil prices is likely to result in strength in Russian macro data in the months to come.”
“Risks to our constructive views on the rouble come predominantly from the possibility of a major negative turn in the US/Russia relationship or a sharp drop in oil prices. Absent such developments we would recommend that investors sell USD/RUB on possible spikes back to the 73.00 area.”
“The central bank is widely expected to deliver another policy rate hike on Friday (22 October). Rates markets’ pricing for the outcome of this meeting has shifted from a policy rate hike of close to 25bps earlier this month to a hike of 40bps-50bps. The rouble does not tend to react much to policy rate decisions. We do not see a reason to expect the coming meeting to differ from the norm in this respect.”
