USD/RUB: Russian ruble remains significantly undervalued – MUFG

Matías Salord FXStreet

Analysts at MUFG Bank, see a possible trade idea of shorting USD/RUB with an entry-level at 77.700, a target at 74.200 and a stop-loss at 79.900.

Key Quotes:

“The RUB remains significantly undervalued leaving scope for further upside after recent gains. 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 around 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.”

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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