The ruble: the Risks of a deep fall against the dollar, rising

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The Russian currency recovers ground after a serious drawdown at the end of last week: quotes USDRUB then rose 70 cents to 65.64, but EURRUB has risen to 81 kopecks to a 73.66. Today, the markets are experiencing a wave of demand for risky assets, which supported the ruble, but because USDRUB is trading lower by 24 kopecks (65.39) and EURRUB falls by 23 kopecks (73.43).
On the fundamental side, the purchase of the ruble supported by unexpectedly strong manufacturing PMI readings from China, Japan and Russia. In addition, the Chinese authorities pushed back the increase in tariffs on imports of American cars.
Positive data from Asia as well as strengthening of positions of dollar in Russia, reducing fears around unnecessarily sharp slowdown in the world economy and spurring demand for commodities, including oil.
At the beginning of the new quarter, investors focus on General trends for the previous period, paying attention to the growth of oil and several stock indices. In Q1, their growth has been high over the last few years. At the same time, the Russian currency has strengthened by 6% against the dollar and 8% against the Euro, which also sharply contradicts initial expectations. In the context of the return of risk appetite, market participants are increasingly focusing on profitable assets such as the pairs with ruble.
An important factor for this dynamics were the actions of the Ministry of Finance, which has increased dramatically the placement of government bonds. Their appeal is supported by the desire of investors to buy a relatively reliable and profitable securities to sanctions. Indeed, in the case of the introduction of the most hard to them, foreign investors will not formally be able to participate in new releases.
However, it is worth to note that the ruble is very difficult to add even with a favorable news background. He risks being under pressure in the coming days and weeks, otchityvayasj from multi-month highs the trend of last week.
Dynamics of the volume also confirms that investors are willing to sell the ruble, rather than buy it: on the MICEX in the days of the depreciation of the volumes are significantly increasing, and on the CME, the volume of short positions reached historic highs. This is an important signal that speculators – the most professional market participants gear up for the decline of the ruble.
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Alexander Kuptsikevich,
Analyst
FxPro