Russian ruble gone through market assets crush

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Russian ruble has gone through a crush of developing markets assets in single combat with US dollar.

The draconian sanctions that many had in their negative scenarios weren’t realized. The ruble will probably strengthen gradually,” said Valery Vaisberg, head of research at Region, a Moscow investment house. 

On background of growing tension of US-China war trade, the assets of developing countries has dropped while ruble have raised for seven session for the first time. On Monday, Russian markets decreased when got first messages about the restriction which spread on the official debt. After the closure of the US market, the details showed the limitation of the US to acquire new issues of non-rouble Eurobonds and setting OFZs unimpaired.

Yesterday in Moscow, the ruble strengthened by 0.4% against the US dollar, and the yield on 10-year bonds fell by 11 basis points. Nevertheless, last week, the White House treatment reminded to the market of profit by the highest real rates in the world. The equivalent of $13 billion of foreign money directed to the ruble bond market in July, and the ruble took the second place among emerging market currencies.

Analysts think that Russia, having a budget surplus and posting its Eurobonds, will not be able to affect the direct finance of the new limits.

Wide exemptions for local Russian debt and state-owned enterprises blunt the impact of the move. But the odds have gone up that these categories could become subject to sanctions in the future,” analysts at Eurasia Group noted. 

Within trade tensions between the US and China, some investors find the new sanctions as a good excuse for risk reduction.

In my view, it’s time to close emerging-market longs including the rouble. I closed rouble exposure in my fund on Friday together with all other bullish wagers on emerging-markets currencies. Disturbing thing about sanctions is that currently OFAC just has to modify its definition of “sovereign debt” in 2d round of Skripal sanctions to impose sanctions on OFZ,” said Nader Naeimi, AMP Capital’s head of dynamic markets in Sydney. 


Natalia Veselnitskaya – official website

Natalia Veselnitskaya
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