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Analysts at Danske Bank, see macro fundamentals favorable in Russia but they warn that geopolitical risk remain present. They see USD/RUB at 61.50 in 1M and 55.70 in 12M.

Key Quotes:

“As we expected, the RUB reaction has been muted to the first news on Russia’s new government. The so-called ‘Kudrin card’ has been played with enough cautiousness: Chief Executive of the Russian Centre for Strategic Research (CSR) and ex-Finance Minister Alexei Kudrin has agreed to become the head of the Accounts Chamber. The Kudrin effect on the RUB has been limited this time, as his new position in the public sector does not allow him to influence possible economic reforms.”

“Given persisting geopolitical risks as a wave of new anti-Russia sanctions could arise anytime, we raise our view on the USD/RUB increasing demanded geopolitical premium. Our new USD/RUB forecasts have been raised to 61.50 in 1M (previously 59.50), 60.10 in 3M (57.30), 58.30 in 6M (56.40) and 55.70 in 12M (54.90). As we remain positive about the crude price and Russia’s macro fundamentals in the long term, we see macro fundamentals supporting the RUB, keeping a geopolitical premium.”

“Macro fundamentals remain favourable for the RUB’s outlook and oil-price risk points more to RUB upside as the US’s withdrawal from the Iran deal supports crude oil. However, geopolitical risks are present: the RUB is following the emerging market mood closely and the anti-Russian sanctions could hit the RUB anytime.”

“The correlation of crude oil and the RUB remain negative. It even might look that the RUB dislikes the rising oil price: while the Brent 30-day average went up 8.5% over the past 30 days, as of 14 May 2018, RUB/USD fell 6.3% over the same period. We see the RUB/USD as strongly undervalued at current oil prices and stable macro.”