High demand for Russian assets will allow the ruble to fall into depression — analysts
Apr 10, 2019

High demand for Russian assets will allow the ruble to fall into depression — analysts

The ruble tested yesterday's highs on Wednesday, looking at expensive oil and anticipating the rush of demand at auctions OFZ. Analysts around the world explained why the funds should choose the ruble and Russian bonds.

Russia is a country with a current account surplus of the balance of payments, with a politically and financially stable system, which has introduced a fiscal rule to abstract from the "Dutch disease", thereby seriously reducing the dependence of the economy on the external environment. And the latest auctions confirm that investors listen to analysts: in the conditions of the expected slowdown in inflation in Russia and the forecast of a reduction in the key rate, investors stopped responding to the threat of any sanctions, especially since the us senators themselves admitted that they were tired of not being able to punish Moscow. Officials in Washington have accumulated a lot of bills on new sanctions and are currently limited to threats and statements. The US will continue to exert sanctions pressure on Russia for its "bad behavior," us Finance Minister Steve Mnuchin said yesterday. But foreign funds are more interested in high real returns in Russia than these threats.

Also, the attention of players around the world is directed today to the results of the ECB meeting, the minutes of the last fed meeting, the EU summit, where the issue of the UK's withdrawal from the EU will be considered. Belgian Prime Minister Charles Michel admitted today that Brexit could be postponed for a period of 6 months to one year. However, "in the case of disloyal behavior of the British can provide for an immediate cessation of the delay." Analysts say that the decision to postpone partially already in the price of the pound.

By 12:24 GMT quotes of the dollar/ruble pair calculations "tomorrow" were near 64.69, and the ruble is gaining 0.26% of the levels of the previous exchange closure. Against the Euro, the ruble rises by 0.23% to 72.91.

"In General, everything is still positive — oil is expensive, today it is possible to place again a large amount of OFZ, plus, played back yesterday's evening decline in the ruble, provoked by robots (algorithmic programs) on the news (statements by Steven Mnuchin), which in reality did not bring anything new about the sanctions," said the dealer of a large Russian Bank in an interview with Reuters.

Today, the Russian Ministry of Finance will place a 10-year OFZ 26224 and a 5-year OFZ 26227.

"The situation remains generally comfortable. In our opinion, today the Ministry of Finance will again target the attraction of more than 50 billion rubles of debt at auctions", — stated in the analytical review of ROSBANK.

Analysts of Nordea Bank expect that the placement of OFZ, today will be successful, given the very moderate dynamics of inflation at the end of March. At the same time, the demand from non-residents can support the Russian currency. The Bank's experts perceive the evening publication of the minutes of the fed's March meeting as a risk factor. The fed at the last meeting decided to suspend the reduction of the balance sheet by October and abandon another rate hike in 2019. The Central Bank's view on the state of the American economy could seriously deteriorate if there was such a tangible change in rhetoric. If this is the case, the market may return fears of a slowdown in the us economy, fraught with an increase in negative sentiment towards risky assets, according to Nordea. With regard to the ECB meeting, it is not necessary to wait for surprises, so please do not predict the dynamics of the strong Euro.

"As a result, the ruble may try to continue strengthening during the day before the publication of the fed Protocol that can reverse this trend," analysts of Nordea Bank note.

Loko Bank analysts believe that the ruble can continue to grow, despite the fact that there are no special appetite for risky assets now.

"Macrostatistically, all the negotiations between China and the United States are also important, which, although delayed, are still perceived as a positive market background, a possible resumption of the growth of oil production rates from Russia in the second half of the year, as well as short-term prospects for further growth of emerging market currencies and the ruble," writes Deputy Chairman of the Board of Loco Bank Andrey lyushin.

Foreign demand for Russian assets is high due to strong fundamentals, lower inflation and the forecast of a reduction in the key rate of the Central Bank, as well as a decrease in market interest in new sanctions against Russia, the RDIF recognizes. However, there is also a demand for currency from local participants, who can maintain a more cautious approach to key risks and prefer defensive strategies. Today, expect movement in the range 64.50–65, said the chief economist of the Russian direct investment FUND Dmitry Polevoy.

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