USD/RUB: FX intervention barely made a dent – Lloyds Bank

Research Team at Lloyds Bank points out that lower crude oil prices and FX intervention barely made a dent in USD/RUB over the past month and instead, the ruble strengthened against the US dollar, although failed to re-test the February low of 56.55.

Key Quotes

“Nevertheless, intervention efforts by Russia’s finance ministry and central bank are likely to increase, putting weight on the ruble in the coming months. The former is likely to be motivated by an increased desire to better balance public finances, while the latter is likely to prove keen to build up foreign reserves. Inflation, now nearer to the central bank’s target, has left room to loosen monetary policy.”

“At 10%, Russia’s key policy rate, one of the highest amongst the EM countries we cover, has made the ruble attractive from a carry perspective. Meanwhile, once thought to be supportive, US attitudes to Russia under the Trump administration have deteriorated. This has dented the chances of sanctions relief for Russia.”