RUB: Russian authorities view is a headwind – Deutsche Bank

Rhetoric from Russian government officials around RUB being ‘too strong’ has been ongoing for some time, points out the research team at Deutsche Bank.

Key Quotes

“We had comments from the EconMin and FinMin on RUB being ’10-12% stronger than its fundamental level’. However, President Putin has recently come to the defence of the CBR’s stance thus far of maintaining ‘comfort’ with RUB strength. However, with inflation now back at the 4% target for the first time since 2012, and inflation expectations also declining, there is more reason for the CBR to ‘loosen’ its stance on the currency. The first step in this direction is a faster-than-expected easing cycle (which has likely begun with the latest 50bps cut). Should oil remain at or above USD 55, the CBR will also look to rebuild reserves. The bottom line is that with inflation at target and RUB-OIL currently below the budgeted level, policymakers could, at least at the margin, welcome some RUB weakness.”