Since the beginning of the year, the ruble has shown one of the worst dynamics among currencies in developing countries. Analysts said the rise in Treasury yields on expectations of additional fiscal stimulus and spending is becoming increasingly dangerous for emerging market currencies. The ruble is also under pressure from expectations of new sanctions under the Biden administration.
Does this mean that, at least in the near future, growth should not be expected from the ruble? Alexander Kuptsikevich, an analyst at FxPro, answered a question from Fortrader magazine.
– The obstacles to the growth of the ruble continue to accumulate. The calendar weakness of the ruble during the holidays was compensated by optimism from the stormy market rally. The fragile balance sheet, or rather the reduced liquidity, allowed the Russian currency to take root in a narrow range of around 74.50 per dollar and 91 per euro.
However, the growth of the dollar against its main competitors, even against the “defensive” franc and yen, causes concern. A slight bounce of the dollar from two-year lows will be very helpful for the US authorities in the coming weeks. The Treasury will need to place bonds to fund new stimulus, and this requires creating a “favorable backdrop” in the form of a growing currency. The placements will not go unnoticed, sucking liquidity from the markets in the near future.
At the same time, this rebound in the dollar will muffle the voices of those who have buried it in recent months. So one should expect comments from American politicians in support of the “strong dollar”. From this point of view, the next week or two promises to become very nervous for the ruble.
Fixing USDRUB above 75.50-76.00 promises to signal the end of the pullback in the ruble and start a new impulse for the dollar to rise above 80. Keeping the Russian currency below 75.50 will keep its chances of further growth in the first quarter, up to 70 per dollar, given positive developments.
Despite all the risks, positive for the ruble forecast is still a priority… The global economy continues to recover, as does the demand for raw materials and metals, so it seems like a very expensive idea to bet against the ruble in the next few months. The optimistic scenario of the development of the recovery assumes the strengthening of the ruble below 73 per dollar and 90 per euro by the end of January. And at the end of the quarter, the rates may be at 70 and 88, respectively.
If it were not for a number of alarming signals that we analyzed at the beginning, this consolidation would have been worth taking as a breathing space for the ruble before a new growth impulse.