Ruble: the Rise of US yields, the main threat
Contrary to expectations and global market sentiment, the Russian currency increased on Tuesday its position. The USD / RUB pair begins trading Wednesday to 66.43, which is 15 cents lower than the start of the previous session. EURRUB opened the day at 75.17, after losing 51 penny per day.
In our opinion, be imprudent to count on the further strengthening of the ruble, as on the horizon the clouds are gathering. Oil adds about 1%, after rising 0.7% yesterday. Support to quotations was rendered by messages about disruption of supplies from Libya after seizing the local host of the largest deposits of the country.
However, in the longer term is to pay attention to the assessment of the situation: experts believe that the current restrictions by OPEC+ is not enough to balance the market in the next 3 months. In this case, the Energy administration (EIA) forecasts production growth in the country in 2019 to unprecedented 12.06 million barrels per day against the average of 10.88 million in the past year.
Balance of production and stocks will return in the focus markets by the end of the day will be published weekly data for the us. This may trigger a new round of volatility quotes.
However, a more pressing threat for the ruble, in our opinion, is the rise of US yields. This significantly reduces the attractiveness of ruble assets relative to risk-free U.S. securities. Some time emerging markets will ignore this correlation, however, recall that earlier episodes of rising yields of treasuries, the US turned a sellout on the debt markets of developing countries.
After debt markets, in Forex the dollar Index has quickly turned into growth and back to multi-month highs. If current conditions in the global markets will remain, for the ruble will not question to drop or not. The question is when. Presumably, that is the term for a period of from several hours to a couple days.