19 Dec 2014
RUB stable…for now – BTMU
FXStreet (Barcelona) - Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, explains that the panic related to the Russian currency calmed down after Russia’s decision to reject the notion of capital controls, stabilizing the RUB.
Key Quotes
“President Putin yesterday gave his annual year-end press conference and was quick to point the finger at external factors for the problems of the Russian economy. He admitted that the crisis went beyond the price of oil with sanction contributing to the problems.”
“The decision to strongly reject the notion of capital controls appears to have calmed the panic that was evident on Tuesday and the ability of Russian households to continue to withdraw funds in dollars and euros has helped ease concerns somewhat.”
“But the price of oil remains crucial. Accounting for two-thirds of Russia’s exports and 50% of government revenues mean huge dependence on the price. We are watching the price of crude oil in rouble terms from a government budget perspective and this has averaged around 3,400 over the past two years, and the Russian government may be content as long as this rouble price can be maintained. It is currently quite close to that, trading as I write at 3,630 in Brent terms. But if crude was to say drop to USD 50pbl, that would imply USD/RUB advancing to the 68.000 level.”
“The other piece of interesting news comes on the political front. On the one hand President Obama signed into law the potential for the US to implement tougher sanctions on Russia going forward.”
“President Obama stated that any change would be done in consultation with the EU. However, we now are seeing the first signs of disagreement over the EU’s sanctions stance. The Danish Foreign Minister yesterday stated that there was a danger that the sanctions could now inflict too much pain on Russia while France is shifting its position on Russia also. President Hollande made a surprise trip to Moscow on 6th December and raised the idea of easing sanctions at a recent gathering in Brussels.”
“Perhaps there are some increased hopes that the crisis will result in some behind-the-scenes manoeuvring by Russia to end the crisis in Ukraine. That’s not expected and would certainly give the rouble a lift.”
Key Quotes
“President Putin yesterday gave his annual year-end press conference and was quick to point the finger at external factors for the problems of the Russian economy. He admitted that the crisis went beyond the price of oil with sanction contributing to the problems.”
“The decision to strongly reject the notion of capital controls appears to have calmed the panic that was evident on Tuesday and the ability of Russian households to continue to withdraw funds in dollars and euros has helped ease concerns somewhat.”
“But the price of oil remains crucial. Accounting for two-thirds of Russia’s exports and 50% of government revenues mean huge dependence on the price. We are watching the price of crude oil in rouble terms from a government budget perspective and this has averaged around 3,400 over the past two years, and the Russian government may be content as long as this rouble price can be maintained. It is currently quite close to that, trading as I write at 3,630 in Brent terms. But if crude was to say drop to USD 50pbl, that would imply USD/RUB advancing to the 68.000 level.”
“The other piece of interesting news comes on the political front. On the one hand President Obama signed into law the potential for the US to implement tougher sanctions on Russia going forward.”
“President Obama stated that any change would be done in consultation with the EU. However, we now are seeing the first signs of disagreement over the EU’s sanctions stance. The Danish Foreign Minister yesterday stated that there was a danger that the sanctions could now inflict too much pain on Russia while France is shifting its position on Russia also. President Hollande made a surprise trip to Moscow on 6th December and raised the idea of easing sanctions at a recent gathering in Brussels.”
“Perhaps there are some increased hopes that the crisis will result in some behind-the-scenes manoeuvring by Russia to end the crisis in Ukraine. That’s not expected and would certainly give the rouble a lift.”