Page 59 - RusRPTAug19

7.1 FX issues
In mid-June, the ruble reached its a high in 2019 of RUB63.285 to the dollar. However, the ruble is down 9% YTD against the dollar as of July 11. The strength of the Russian currency in the first months of 2019 can be traced back to a significant reduction in the sanction risk premium priced in the exchange rate. “As a consequence of the abating risk of new US sanctions as well as the recent appreciation of the ruble, the Russian central bank had room to ease monetary policy. Having said that, current easing is a normalisation of Russian interest rates given last year’s precautionary 50bp rate hikes and not necessarily a complete rate cutting cycle. In addition to the above, the window of opportunity provided by the US Fed for local emerging market central banks to prop up their currencies seems to be another driver of returns. However, a lot of positive factors are currently priced in, which could make any negative shocks to Russian asset prices even worse,” Sebastian Petric, a financial analyst with Raiffeisen Bank International (RBI) said in a note.
59 RUSSIA Country Report August 2019 www.intellinews.com