In any country, the population responds painfully to news when the national currency loses in value. The Russian ruble is no exception. However, analysts acknowledge the fact that the ruble has asserted its strength despite domestic and global headwinds. Notably, the Kremlin is making every effort to push the ruble down. In fact, it credits its remarkable resilience mainly to external factors, first and foremost to the latest policy update of the Federal Reserve. At the policy meeting in late February, the US central bank announced its intention to adopt a patient approach to monetary policy and make a pause in the cycle of monetary tightening. The dovish rhetoric has been bullish for currencies of emerging markets, including the Russian ruble. Meanwhile, the Federal Reserve is thinking about at least one rate hike this year. Besides, the regulator announced that it is ready to halt tapering its swollen balance sheet in late summer. “Thus, the cautious decision of the US regulator took the shine off US dollar as a higher-yielding asset. On the other hand, the ruble is winning favor with investors as its yielding capacity is now being viewed as one of the most interesting among other global currencies,” forex analyst Andrey Kochetkov comments on the ruble’s strong performance.
Russia’s finance ministry also benefited from the Fed’s soft rhetoric. The ministry profited from an auction of federal loan bonds which were sold amid growing demand for riskier assets. The successful auction provided the Russian ruble with solid support. To sum it up, the ruble could find an excuse to strengthen to 62 versus the US dollar. The only threat to the ruble’s steady rally is forex interventions by the Bank of Russia as the government is interested in the weaker national currency.
