Back
6 May 2015
RUB remains strong, CBR eyed – BAML
FXStreet (Edinburgh) - Analysts at BAML remarked the positive performance of the Russian currency as of late, although further moves by the CBR cannot be ruled out.
Key Quotes
“We think the strong RUB rally has already pushed it beyond the new equilibrium level, which we estimate at RUB55/USD”.
“As a result, we expect the further move should start to slow or get constrained by the CBR”.
“We believe the CBR has withdrawn from the FX market for good and will not intervene to move RUB in any direction”.
“However, the CBR can still keep control over the FX market through conventional rates tools, FX repo in particular”.
“The CBR has about $34.8bn in FX repo loans outstanding, out of which $10.5bn will come due over the next month”.
“This makes FX repo rate a powerful tool to control FX demand, as a 100bp rate hike over the past two weeks could boost FX demand from banks, which will be forced to repay at least part of their debt to the CBR”.
“Such squeeze of FX from the banking system would also boost CBR FX reserves”.
Key Quotes
“We think the strong RUB rally has already pushed it beyond the new equilibrium level, which we estimate at RUB55/USD”.
“As a result, we expect the further move should start to slow or get constrained by the CBR”.
“We believe the CBR has withdrawn from the FX market for good and will not intervene to move RUB in any direction”.
“However, the CBR can still keep control over the FX market through conventional rates tools, FX repo in particular”.
“The CBR has about $34.8bn in FX repo loans outstanding, out of which $10.5bn will come due over the next month”.
“This makes FX repo rate a powerful tool to control FX demand, as a 100bp rate hike over the past two weeks could boost FX demand from banks, which will be forced to repay at least part of their debt to the CBR”.
“Such squeeze of FX from the banking system would also boost CBR FX reserves”.