USD/RUB: Room for ruble weakness to reverse further – MUFG


Analysts at MUFG Bank, continue to see positively a trade idea about shoring the USD/RUB pair, with a target at 74.200 and stop-loss at 79.900. They consider the Russian ruble is in positions to reverse it weakness even further. They view the RUB remains undervalued leaving scope for further upside after recent gains. 

Key Quotes:

“Risk sentiment towards emerging markets is improving more broadly following the US election results and Pfizer vaccine news. It could continue to provide a positive tailwind for the RUB. The RUB has so far lagged the rebound in other high yielding emerging market currencies even as the price of oil has rebounded sharply by over 20% so far this month. It makes the RUB appear even more undervalued.”

“We continue to believe that the RUB is already pricing in a very elevated geopolitical risk premium to reflect fears over more draconian sanctions being imposed on Russia under the Biden administration. However, our political analysts in Washington do not think punishing Russia will be an immediate priority for the new government. It supports our view that the market is currently pricing in too much downside risk into RUB. Even after recent rate cuts from the CBR, yields on offer in Russia remain attractive compared to low yields elsewhere and inflation is relatively subdued as well.”
 

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