The overall recovery in the rouble since the start of the year is mostly a result of a stabilisation in global oil prices. However, in our view, the acceleration in the rate of rouble appreciation over the past couple of weeks cannot be justified based on the development in oil prices and the general global financial environment.
Looking ahead, we expect rouble weakness to resume, driven by significantly higher Russian inflation than in the outside world (what we could call the competitiveness effect), continued very weak growth and a desire on the part of the central bank to ease monetary policy. While it is clear that geopolitical risks seem to have eased and are much less of a market driver than in 2014, it could still be a potential source of rouble volatility ahead.
In the light of the recent development and our analysis, we have adjusted our forecasts for USD/RUB to 60, 65 and 70 in three, six and 12 months respectively. We recommend using the present strength of the rouble to hedge income in rouble.
Our forecast for the nominal rouble exchange rate implies a fairly 'flat' outlook for the rouble exchange rate in real terms.
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