Ruble: Congressional Elections fueled the sanctions risks
Monday, August 6, at the currency market of the Moscow Exchange the US dollar rises in price by 0.3% to 63.5 rubles
From a fundamental point of view on quotes affected mainly by three factors: the intervention of the Ministry of Finance in the process of buying the currency on the revenue from oil and gas “windfall” with the price cut-off grade Urals above $40 per barrel, the demand of non-residents on ruble assets, including Federal loan bonds, and global capital flows in the U.S. amid increasing bets the biggest Central Bank.
According to our calculations, just the dollar taking into account only the factor of intervention of the Ministry of Finance is in the range of 55.5-61. Features of the mechanism of these interventions do not give a ruble to strengthen beyond this range, but do not restrict it in terms of a movement in the direction of weakening. Accordingly, against the background of tightening of monetary policy, including the fed, and April U.S. sanctions (non-residents since the beginning of April has sold 20% of its portfolio OFZ bonds in the amount of 400 billion rubles.), the demand for ruble assets has decreased. The course went to the fluctuation range of 60-65 rubles. Theoretically, negative, not related to the intervention of the Ministry of Finance, is of local character, and gradually the quotes should return to the levels of 55.5-61. The key question is how soon can this happen, given the unpredictable geopolitical sentiment.
Now the political situation in the U.S. against elections in the U.S. Congress in early November and, obviously, failed to trump talks with Putin suggests that negative geopolitical agenda for the ruble will continue for at least the next 3 months. Subsequently, the national currency can get the long-awaited support and begin to strengthen. Now, however, return to the range of fluctuations in the dollar of 55.5-61 may take more time than we previously expected.
Considering all the above, we increase the target on the USD/RUB at the end of 2018 from $ 57,7 to 58.7.