Relatively stable crude oil prices, a semblance of calm in Russia's financial markets, and areturn of retail depositors to their local currency have been credited as behind the 23%appreciation in the RUB versus the USD since mid-March.
Notably, this has come about despite increased ceasefire violations in eastern Ukraine over recent days. The RUB's recovery, however, increases the risk that Russia's central bank will likely seek to cut interest rates by more than anticipated this year, potentially by 200bps rather than our forecast 100bps at its April meeting.
"Policy easing, coupled with our call for a V-shaped recovery in crude oil prices and Fedpolicy tightening, supports our forecast for RUB to weaken against the USD, before settling at55 by year end", notes Lloyds Bank.
