The drop in the dollar has masked the negative effect of oil for the ruble

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On Thursday the Russian currency market were moving against the trend. USDRUB fell 15 cents to 65.72. EURRUB, in contrast, was up 38 cents to 74.96. Such dynamics contributed to a reversal of global markets to growth after a “brutal” October, as it is called in the financial media.
However, movements against the trend are also often common in the end of the month or beginning of next when the players took profits from the previous movement.
In addition, the market captures the hope that the worst may be behind us. In September, suffered from the markets of developing countries, but the response of governments and Central banks, it seems, helped to fully restore confidence and to restore calm to financial markets.
The fears over trade wars subsided after a telephone conversation between the leaders of the United States and China, which trump called “pleasant.” As a result, Chinese markets are developing rebound, adding since the beginning of the week, more than 4%.
And yet, if you look at the future beyond the next few days, it is impossible to lose sight of the reversal of oil to decrease. Brent has lost since peak levels, more than 16%, and remains under pressure this week, despite the reversal of the markets to growth and the weakening of the U.S. currency.
Moreover, to Brent increased risk of recurrence 2014. At the same time we see an increase in production to peak levels – in the US, we report (preliminary) the increase in production in Russia and Saudi Arabia. Data on the number of working drilling rigs in the United States noted that the activity in October increased significantly, despite the decline in the rate and reserves of oil has steadily increased.
Technical chart analysis also suggests that the graph of “black gold” fell down from the trend in growth that threatens to gain sales.
Additionally alarming is the fact that the weakening of the dollar by 0.7% by the end of Thursday and the growth of the Asian and American markets by 4% from the beginning of the week, failed to restore the faith of the traders in oil. On Thursday it decreased by 2.6%.
The weakening dollar has masked the negative effect of the ruble, but it is unlikely he will be of short duration. Further weakening of the dollar able to maintain a short-term recovery of the Russian currency, but if the oil turns to growth, risks to the RUB will continue to accumulate.
Alexander Kuptsikevich,
Senior analyst,