The resumption of FX purchases will prove bearish for RUB. The Russian central bank (CBR) announced resumption of FX purchases from January 15th. This is likely to weigh meaningfully on RUB, in our view. The currency has struggled to appreciate while purchases were suspended and the full current account surplus was allowed to support the FX market. With FX purchases in place, the current account support will be much smaller.
Meanwhile, recurring geopolitical tensions are likely to weigh on capital flows (see here for further details). Noticeably, the central bank now indicated that any future RUB weakness is much less likely to be met with renewed suspension of the program. This, in our view, both increases the scope for depreciation in RUB as well as the chances CBR will deliver more hikes.
Options Trade Tips (USDRUB): At spot reference: 69.61 levels, we maintain our 21-January-2019 1x1 USDRUB (68/71) call spread. We may have been a bit early with this trade as the resumption of purchases was now announced only for January 15th, after the expiry of our option. Yet, amid global EM risks and negative RUB seasonality around the year-end, we still see a good chance RUB will weaken in anticipation of the budget rule headwind within the remaining maturity of the trade. Courtesy: JPM
Currency Strength Index:FxWirePro's hourly USD is inching at 37 (which is mildly bullish), while articulating (at 13:28 GMT).
For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex


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