- USD/RUB extends losses to the 73.50 region.
- The Russian central bank (CBR) raised rates by 100bps.
- The CBR justified its move by rising inflationary concerns.
The Russian ruble gathers further traction and forces USD/RUB to ease to new 2-week lows in the mid-73.00s on Friday.
USD/RUB weaker on hawkish CBR
USD/RUB loses ground since Tuesday and navigates the area of multi-day lows near 73.50 after the CBR hiked the key rate by 100bps to 6.50% at its event earlier on Friday.
Higher-than-projected inflation and persistent high inflation expectations seems to have convinced the central bank to tight its monetary policy further, delivering a larger-than-forecast rate hike.
In fact, the central bank now sees inflation struggling to return to the bank’s target of around 4% in the second half of the next year and now projects the CPI to be within the 5.7%-6.2% range by year-end (from 4.7%-5.2%).
When comes to interest rates, the CBR now sees the policy rate to be between 6.5%-7.1% (from 4.8%-5.4%) by end of this year and within the 5.3%-6.3% band in 2022.
On another front, speculators trimmed their gross longs in RUB for the second session in a row, taking net longs to 4-week lows on the week ended on July 13. The Russian currency has appreciated since this week’s cut-off date (July 20) and ahead of today’s decision by the CBR, so it will be interesting to see if expectations of further tightening appears in the next CFTC report.
USD/RUB levels to watch
At the moment the pair is losing 0.27% at 73.58 and a breach of 73.35 (50-day SMA) would aim for 72.03 (low Jun.25) and finally 71.55 (2021 low Jun.11). On the flip side, the next up barrier emerges at 74.30 (100-day SMA) followed by 74.74 (200-day SMA) and then 75.35 (monthly high Jul.8).
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