Wednesday, September 28, 2016

Strengthening of ruble creates

Strengthening of the ruble creates conditions to reduce the key rate CBR? Bloomberg

The ruble rose to its highest level in three months against the backdrop of rising oil prices and the "dovish" Fed statements. Strengthening of the Russian currency has increased the possibility of renewed cycle of rate cuts by the Bank of Russia, Bloomberg writes.

The dollar fell against the ruble by 1.32% to 68.25 per dollar as of 17:42 Moscow time against the backdrop of quotes Brent crude three-month high. The ruble has shown the most rapid growth in the last month after the US Federal Reserve reduced its forecasts for interest rates. This fueled investor interest in higher yielding assets in emerging markets.

The Russian currency has become a leader of growth in emerging markets over the past month. The rebound in oil from 13-year low in prices helped reduce fears that the fall of the ruble to a record low in January, acceleration of inflation. The central bank now has space to reduce the key interest rate from 11% for the first time since July, and slowing the growth of the ruble, which is showing signs of overbought, Rabobank analysts believe.

Results of the session of the Russian central bank will be known tomorrow.

"All the focus is on the Bank of Russia, - says Peter Mathis, a currency strategist at Rabobank. - I expect that the regulator will resume the cycle of decline and reduce the base rate by 50 basis points to stop the pace of appreciation of the ruble. "

The 14-day relative strength index reached the ruble to its highest level Thursday October 8th. The value of the index amounted to 68.67, not far from the significant mark of 70. Some technical analysts see it as a sign of overbought asset.

Peter Mathis from Rabobank - one of only seven analysts (among the forty-two surveyed by Bloomberg economists) who expect that at tomorrow's meeting of the central bank lowered its benchmark interest rate by 50 basis points, while more than 70% of traders do not predict any changes .

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