USD/RUB: ruble upside appears limited in the future - Lloyds Bank

Analysts from Lloyds Bank think that the USD/RUB pair has limitation to the downside in the future.

Key Quotes:

“Russia’s short-term interest rates are the second highest amongst the eleven EM countries under our coverage. An attractive yield has helped to shield the ruble from lower crude oil prices over the past month. Yet, there are growing signs that the central bank is ready to slash interest rates.

“The sharp appreciation in the ruble since January has softened the outlook for inflation, while Russia’s economy has been in contraction y/y for five consecutive quarters. Even ignoring the interest rate story, ruble upside appears limited in the future. A strong ruble makes balancing the government’s finances more difficult, particularly in a low crude oil price environment. Similarly, the ruble’s free float in December 2014 has likely led to a structural shift lower against the USD, given it is more vulnerable to shifts in global risk sentiment.”