More isolated now – Commerzbank

The observed exchange rates of the ruble against the US dollar (USD) and the euro (EUR) are entirely artificial and detached from the fundamentals since the sanctioning of the Moscow stock exchange by the US, which stopped trading in these currencies. We maintain our forecast that the underlying value of the ruble against strong currencies such as the euro or the USD will decline in the long term as Russia’s current account surplus will gradually shrink, notes Tatha Ghose, FX analyst at Commerzbank.

USD/RUB Technical Fix to Continue Up

“Even before the US sanctioned the Moscow Exchange (MOEX) and the EU announced its 14th package of sanctions against Russia, the USD/RUB and EUR/RUB exchange rates were mainly “technical fixes ”, because the central bank of Russia (CBR) is blocked. from transactions in dollars or euros. Now that USD can no longer be traded on MOEX either, the USD/RUB exchange rate has become even more “theoretical”.

“Published rates are derived indirectly from OTC and other market sources by the CBR – for example, using the ruble to CNY cross rate. We consider such exchange rate quotes to be unreliable and their daily movements likely fictitious. The USD/RUB and EUR/RUB exchange rates are set to clear the market for a narrow group of traded items, mainly energy and commodities, for which some counterparties are still free to trade in hard currencies.”

“In the longer term, we expect USD/RUB and EUR/RUB to gradually rise as we expect Russia’s current account surplus to narrow. The current account is just a counterpart to the (closed) capital account – when one is closed, the other is likely to close progressively, and that means the USD/RUB technical correction will continue to grow.”