USD/RUB rose yesterday to multi-week high of 72.69 after trading in a directionless fashion between 70.19 and 72.31 since the beginning of July. Economists at Credit Suisse expect a lingering risk of new US sanctions being imposed on Russia and that risk together with stable oil prices will keep USD/RUB supported above 70.00. Spikes should fade above 74.00.
Key quotes
“The risk of new sanctions being imposed on Russia by the US is likely to continue to weigh on the rouble. Increasing and lingering sanctions risks would lead investors to err on the side of caution and refrain from adding sizable long positions in the rouble. We think that in this environment Russian exporters tend to act more slowly than otherwise as they convert their dollar revenues to rouble.”
“Oil prices will be range-trading in the short-run. The recovery in demand for oil globally is being met by a substantial increase in supply. OPEC+ countries are set to increase their cumulative production by 2mn/bbl per day from August while US oil production has been on the rise since it hit a low point in mid-June lows. These developments seem to us consistent with continuation of this month’s oil price stability (in dollar terms), or at least underperformance of oil against other ‘progrowth’ assets such as US equities.”
“These two considerations suggest that USD/RUB will remain supported above 70.00 unless oil prices perform better than we currently expect. Additionally the central bank’s reluctance to signal further policy rate cuts trims the potential for currency-unhedged inflows into local-currency-denominated bonds for now.”
“While risks to the dollar against G10 currencies remain skewed towards the downside we do not see a reason for USD/RUB to rise in a major way from its current level of 72-73 unless substantial new US sanctions are introduced. Therefore, we are biased in favour of selling USD/RUB above 74.00, as we think that the US Congress will ultimately refrain from legislating new and destructive sanctions on Russia.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
GBP/USD stays weak near 1.2400 after UK Retail Sales data
GBP/USD stays vulnerable near 1.2400 early Friday, sitting at five-month troughs. The UK Retail Sales data came in mixed and added to the weakness in the pair. Risk-aversion on the Middle East escalation keeps the pair on the back foot.
EUR/USD extends its downside below 1.0650 on hawkish Fed remarks
The EUR/USD extends its downside around 1.0640 after retreating from weekly peaks of 1.0690 on Friday. The hawkish comments from Federal Reserve officials provide some support to the US Dollar.
Gold: Middle East war fears spark fresh XAU/USD rally, will it sustain?
Gold price is trading close to $2,400 early Friday, reversing from a fresh five-day high reached at $2,418 earlier in the Asian session. Despite the pullback, Gold price remains on track to book the fifth weekly gain in a row.
Bitcoin Price Outlook: All eyes on BTC as CNN calls halving the ‘World Cup for Bitcoin’
Bitcoin price remains the focus of traders and investors ahead of the halving, which is an important event expected to kick off the next bull market. Amid conflicting forecasts from analysts, an international media site has lauded the halving and what it means for the industry.
Israel vs. Iran: Fear of escalation grips risk markets
Recent reports of an Israeli aerial bombardment targeting a key nuclear facility in central Isfahan have sparked a significant shift out of risk assets and into safe-haven investments.