The Russian ruble is set to be on a moderate appreciation path. According to a Commerzbank research report, the USD/RUB pair is expected to stay in the 65 to 67 range in the near-term and gradually fall towards 62 by 2020 as the Central Bank of Russia continues to keep the interest rate high.
There might still be a risk scenario where the U.S. utilizes the new DASKA (Defending American Security from Kremlin Aggression Act) and imposes harsh sanctions on Russia, which would drive USD/RUB to possibly 70. However, there is only a slight likelihood of such a scenario. The base-case is for only moderate sanctions to follow, within the range already discounted by the market, said Commerzbank.
U.S. President Trump does not seem to be in a hurry to impose new sanctions – under the new law, he has considerable discretion on the timing and scope of sanctions.
“If we assume that CBR will hold its policy rate at 7.75% for most of this year, and only gradually lower rates by the end of the year, the real interest rate will remain positive and USD-RUB would drift lower by the end of this year. An upward trend in the oil price will bolster this move”, added Commerzbank.
