MAY 2011

Outlook on Russian Rouble

The Russian rouble is currently trading within a very close correlation to the price of crude oil. In fact a one month graph of the rouble’s performance against the “The Central US dollar is very reflective of the movement in the over the past four weeks. This relationship Bank will be is not entirely surprising given the importance of oil to wary of letting the Russian economy. its appreciate The price of Brent crude per barrel reached $125 last month, to levels that helping the rouble to a 27-month high against the greenback. However, oil has suffered a sharp drop in recent sessions down become a barrier to $110 (commodities have dropped across the board) but to economic the price should bounce back this month, dragging the rouble growth.” with it. Indeed Putin, the Russian Premier, actually commented recently that oil prices will help ’s GDP grow by 4.2% in 2011, from 4% last year, with the economy emerging fully from the global financial crisis by next year. US DOLLAR VS RUSSIAN

Dollar drives rouble funding CURRENT 1MTH 3MTH The dollar has come into favour amid heightened risk aversion USD RUB 27.60 27.00 26.00 over the past week, but as appetite for risk inevitably returns, funds will be redirected to growth-linked such as Keep up-to-date with market the rouble. The dollar still has one of the poorest outlooks trends with Caxton FX’s daily for 2011, suffering from ultra-loose monetary policy at a time and weekly analysis. Click here when most other economies are starting to raise interest rates, or at least indicating that they will do so in the foreseeable future. With Russian inflation sterling weakness is likely to significantly” during the next two accelerating for the first time in prevent the rate breaking to three years. three months in April (hitting higher with all the risks skewed Looking to the nearer future 9.6%), the Russian to a slightly stronger rouble, though, we expect the oil prices raised its interest rate for the provided we see the price of oil to remain supportive of the second time this year. Finance fall no further. It must be noted Russian currency. Certainly a Minister Kudrin also stated that though that the Russian currency move to 26, or even 25, Russian fighting Russian inflation was is not freely floating and the roubles per US dollar cannot be more important than containing Central Bank will be wary of ruled out in the medium term. the rouble’s gains, adding to the letting its currency appreciate to rouble’s upside potential. levels that become a barrier to However, against sterling the economic growth. Indeed, Kudrin rouble’s gains have been less recently said that the rouble’s marked. Looking ahead, ongoing exchange rate “won’t change

US dollar vs Russian ruble: past 12 months

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