Page 59 - RusRPTMay19

7.0 FX
RUSSIA -FX
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
Currency (units per EUR) (eop)
71.21
70.88
63.81
60.60
67.50
68.04
69.26
70.36
73.39
Currency (units per USD) (eop)
64.26
63.16
60.66
56.38
59.09
58.02
57.73
57.09
62.73
Currency (units per EUR) (average)
74.38
72.15
68.13
63.27
62.88
69.22
68.78
69.88
73.73
Currency (units per USD) (average)
65.88
64.62
63.07
58.82
57.14
59.00
58.41
56.87
61.783
The Russian ruble has been the best-performing EM currency so far this year, in spite of the threat of tighter US sanctions, which caused a premium to open up in February. Capital Economics thinks that the ruble rally will reverse over the coming quarters as oil prices drop back: “We forecast the ruble to fall from 63.9/$ now to 69/$ by year-end. This depreciation would be exacerbated by a further tightening of US sanctions,” the analysts said in a note.
The ruble has appreciated markedly against the dollar since the start of this year. It is up by around 9% over this period, which is (by some distance) the best performance of any EM currency. The ruble is now trading at 63.9/$– close to its strongest rate in eight months. It’s not a surprise to that the rise in the ruble has coincided with an increase in oil prices. But two other points are worth stressing.
First, the ruble has also been supported by the narrowing spread between Brent crude and Urals crude, the benchmark for Russia’s oil exports. Having traded with a discount of more than $3pb relative to Brent at the end of 2018, Urals crude has traded with an average discount of less than $1pb so far this year. The most likely explanation for this is that OPEC production cuts and problems in Venezuela have reduced global supplies of heavy crude, like Urals.
59 RUSSIA Country Report May 2019 www.intellinews.com