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During February the Russian rouble strengthened further against the US dollar from 75.746 to 73.868. CBR’s guidance on neutral range for the real policy rate means RUB appreciation in the coming months. Thus, economists at MUFG Bank forecast the USD/RUB at 69.83 by year-end.

Key quotes

“With Brent now firmly above $65/b and the reduction in central bank FX purchases from around $100 M a day to $30 M, we view that RUB appreciation has further to run.”

“Last month the CBR articulated its monetary policy stance with a noticeable hawkish shift, and during a press conference, Governor Nabiullina confirmed that there was no more room to cut rates further. Crucially, she added that the CBR will be weighing a return to monetary policy normalisation in the future. We view that such statements could be instrumental for the RUB as it signals that the next rate move might be a rate hike.”  

“If the CBR were to return to a neutral monetary policy, it would be done either via a robust disinflation process (inflation falling close to 3%) and/or via a tighter monetary policy (policy rate hikes). On net, we continue to believe that there is strong RUB upside potential.”

“Geopolitical risks are a lingering concern but we view that fundamental drivers will outweigh this and drag USD/RUB below 70.000 by year-end.”