More visible weakness in April
Искандер Луцко
The weakening will continue, given that the rouble now looks overvalued, according to our estimates
Based on the current oil prices the rouble’s justified rate is 67 per dollar. The current rate is risk- and premium-free, while other Russian assets such as OFZs, Sberbank shares etc have already been trading at a premium emanating from geopolitical situation
We expect uncertainty over the rouble and other Russian assets to remain, unless Congress decides on sanctions. The bulk of volatility accounts for non-residents, while investors’ appetite depend on geopolitics
The prospects of further sanctions including against OFZs are set to improve in April, leading to a weaker rouble that may edge lower to 70+ per dollar. Most likely, it will happen after the U.S. — China trade deal
USD/RUB outlook for 2019
2H18 will see further seasonality-driven rouble weakening, but the rate will largely depend on sanctions
Global FX performance vs fundamentals, %
Source: ITI Capital, Bloomberg
Global FX vs USD, %
Source: ITI Capital, Bloomberg