Morgan Stanley went short USDRUB at the NY close on Thursday

  • Stop loss at 64.20
  • Target 59.50

MS reasoning:

  • given the idiosyncratic stories in other high- yielding EM countries, Russia now looks better than its peers
  • The Central Bank of Russia is likely to keep rates on hold at its meeting tomorrow and for the time being given the volatility in the rest of EM, supporting real rates in Russia
  • The MinFin's intervention and current account seasonality are negative for RUB but they could be offset by World Cup- related inflows and cleaner positioning among foreigners
  • The CBR data show foreigners sold $3bn of OFZs in the past two months, or 9% of foreign ownership
  • Oil prices are likely to stay high as we expect no production increase from OPEC at their meeting on 22 June

MS highlight:

  • A risk to this trade would be renewed emphasis on sanctions from the US, weighing on sentiment

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USD/RUB chart, daily: