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“We expect USD-RUB to remain in the 65.00-67.00 range in the near-term and gradually decline towards 62.00 by next year as CBR maintains a high real interest rate,” Commerzbank analysts note.

Key quotes

“There could still be a risk scenario where the US utilises the new DASKA (Defending American Security from Kremlin Aggression Act) and imposes harsh sanctions on Russia, which would drive USDRUB up to, say, 70.00. But, we see only a small probability of such a scenario – our base-case is for only moderate sanctions to follow, within the range already discounted by the market.”

“US President Trump does not appear to be in a hurry to impose new sanctions – under the new law, he has significant discretion on the timing and scope of sanctions. If we assume that CBR will hold its policy rate above 7% for most of this year, and only gradually lower rates to 6.5% by the end of next year, the real interest rate will remain significantly positive and USD-RUB would drift lower by the end of this year. An upward trend in the oil price will bolster this move.”