Summary
• Another leg down in oil prices, worries over a fourth COVID wave in Europe, and ongoing tensions with the EU leave RUB under pressure.
• Higher FX purchases this month are probably also adding to the weakness.
• With the C/A improvement likely to have peaked, Nordstream 2 delayed, and ongoing geopolitical tensions, we see a rangebound performance ahead.
Market Implications
• Neutral USD/RUB.
Rangebound RUB Ahead
The ruble faces pressure from multiple sources. The Netherlands, Ireland, and Austria have introduced new Covid restrictions; Germany could follow. Tensions with the EU over Ukraine and Belarus are mounting. And the dispute over Russia’s gas supply to Europe is ongoing. October’s 2.6% rally in the currency – which came alongside an 11% MoM gain in oil – has now reversed, with USD/RUB back above 73. Given broad EUR weakness, ruble depreciation against the basket has been more contained, with the index currency now back at early October levels. We see limited scope for any retracement from here.
Summary
• Another leg down in oil prices, worries over a fourth COVID wave in Europe, and ongoing tensions with the EU leave RUB under pressure.
• Higher FX purchases this month are probably also adding to the weakness.
• With the C/A improvement likely to have peaked, Nordstream 2 delayed, and ongoing geopolitical tensions, we see a rangebound performance ahead.
Market Implications
• Neutral USD/RUB.
Rangebound RUB Ahead
The ruble faces pressure from multiple sources. The Netherlands, Ireland, and Austria have introduced new Covid restrictions; Germany could follow. Tensions with the EU over Ukraine and Belarus are mounting. And the dispute over Russia’s gas supply to Europe is ongoing. October’s 2.6% rally in the currency – which came alongside an 11% MoM gain in oil – has now reversed, with USD/RUB back above 73. Given broad EUR weakness, ruble depreciation against the basket has been more contained, with the index currency now back at early October levels. We see limited scope for any retracement from here.
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