USD/RUB: Room for more RUB appreciation on a three to six-month horizon - Nordea Markets

Analysts at Nordea Markets, forecast the USD/RUB pair at 63.50 in 3M, 62.5 by the end of the current year and at 64.00 by mid-2020. They point out the RUB is showing a stellar performance thanks to generally positive risk sentiment, comfortable oil prices, and the absence of sanctions developments. 

Key Quotes: 

“The RUB continues to massively outperform other currencies, appreciating by 8.75% YTD. Since the last issue of EM View, the RUB has sustainably moved below a very strong support level around 65.5 for USD/RUB that was unbreakable for almost six months.”

“As the global risk appetite has remained relatively strong and oil prices have comfortably settled around USD 70/bbl, the RUB-specific support factors that we mentioned last month have come more vividly into play. Foreign investors remain strongly attracted to Russian assets, as confirmed by record-high demand for Russian sovereign debt (OFZ) at weekly auctions. Since the beginning of 2019, foreign investors' holdings of OFZ have increased by almost USD 4bn. The net RUB long position has been at an all-time high for three consecutive weeks.”

“We keep our bullish RUB forecast unchanged. We view continued portfolio inflows as the key support factor, similar to the 2017 scenario. We believe earlier-than-expected reescalation of sanctions talk and softening global risk appetite are the key threats to our positive forecast. Monetary easing is expected to restart in the second half of the year. For now, we stick to our previous forecast for a first cut in Q4 2019, but the latest developments may be supportive of an even earlier move.”