RUB: Under pressure in the coming weeks – Nordea

The next Bank of Russia (CBR) meeting is scheduled to take place on 18 March while the current global market sentiment suggests that the RUB will likely remain under pressure in the coming weeks, according to analysts at Nordea. USD/RUB trades at 74.4195.

Key quotes

“USD/RUB and EUR/RUB face a high risk of staying above 70 and 80 respectively in the coming weeks with continued high volatility. A V-shaped currency recovery is unlikely given the changing structure of the oil market after OPEC+ deal collapse.”

“Given the absence of the OPEC+ support for the oil market, oil prices could experience a prolonged period of staying at low levels. We see a slowdown in the global coronavirus spread as a necessary prerequisite for a sustainable RUB stabilisation.” 

“The currency could regain some ground closer to the middle of the year with a range of 65-70 vs USD and 75-80 now seen as our baseline for year-end.”

“We expect to see the key rate unchanged at 6% at the next CBR meeting. Experience of 2018 shows that the exchange rate pass-through to prices is around 6%, meaning that a currency depreciation by 10% roughly adds 0.6% to inflation at a 6-months horizon.”

“The CBR has suspended for the next 30 days the regular FX purchases done in accordance with the budget rule. The current oil price is below the base price implied by the budget rule for today. Thus starting from April the CBR will likely start selling FX from the national wealth fund to finance budget spending.”