The ruble is teetering over the abyss
The ruble rose on Monday to mark 65.85, but at the end of the day sharply back downward, closing trading Monday falling 47 cents to 65.17. EURRUB touched a mark of 74 but finished session at the level of 73.08.
The ruble has recovered some ground after stronger demand for risky assets after news about growth in manufacturing activity in China and the United States, as well as reports of progress in trade negotiations with these countries.
States consider new sanctions against Iran and Venezuela: the news at the moment support oil prices and at the same time – the Russian currency. However, the mere fact of such attention States (the largest producer of oil) to the “competitors” in this market makes with tension expect news about sanctions against Russia.
As we saw last week, the ruble remains extremely sensitive to news from this front. Through buying currency for the Ministry of Finance, dependence on short-term fluctuations of oil practically disappeared, and the low level of public debt and a balanced budget eliminate the solvency of Russia from the list of immediate risks for investors.
However, a ban on the purchase of new issues of government bonds, in case of its announcement, will become a serious negative factor for the quotations of the ruble.
While he remains near multi-month highs against the dollar and the Euro, the potential weakening of the higher chances of further growth. But recent volatility should be considered as a natural dynamics on the path of weakening at least to the upper boundary of the trading range from 69.0. Movement can take several weeks or months, and can suddenly shoot at the announcement of tough sanctions against government debt of the Russian Federation. In any case, the ruble is now like sitting on a powder keg which at any moment is able to take off.