USD/RUB likely to trade around 64 by end-2016, 62 by end-2017

The Russian ruble was increased to new year-to-date highs against the U.S. dollar by more than a higher crude oil price. Renewed attempts by the Russian government regarding privatization have alleviated the burden on the Russian currency by serving to relax budgetary pressures, noted Lloyds Bank in a research note. Moreover, after a 50 basis points interest rate reduction to 10 percent, the Central Bank of Russia has hinted that it is not expected to further ease policy in 2016.

The underlying wage pressure is one reason for the central bank’s hawkish tone, as the Russian economy begins to indicate certain positive signs in the third quarter. However, ruble selling pressure is expected to mount, according to Lloyds Bank.
 

Prices of crude oil have not been stable in 2016 and the Russian economy continues to face certain long-term headwinds. The strength of the Russian ruble is expected to be curtailed by the central bank’s intervention. The Central Bank of Russia last intervened between May and July 2015 and the USD/RUB had traded between a range of 61.76 and 48.13 during that time.

The USD/RUB currency pair is expected to trade around 64.00 by the end of this year and 62.00 by the end of 2017, added Lloyds Bank.