This year, the Russian ruble has every chance to gain in value. Global banks expect one of the weakest currencies in the foreign exchange market to edge up despite fresh Western sanctions against Russia.
The main reason for such optimism is that most of the potential price-depressing factors have already been included in the forecast. In addition, the ruble is trading at the very bottom. This means that a rebound is inevitable.
Thus, Sergei Strigo, a portfolio manager at London-based Amundi Asset Management, has a rather bullish view on the ruble. He believes that given the current oil prices and vaccination programs, Russian assets retain potential to strengthen against the US dollar. Strigo expects the ruble to trade below 70 per dollar in 2021.
Like many other countries, Russia was forced to close its borders due to coronavirus concerns. As a result, Russians' foreign tourism expenditures dropped by almost $20 billion in 2020 according to the Central Bank of Russia. This, in turn, provided additional support to the national currency.
According to Kamakshya Trivedi, a currency analyst at Goldman Sachs, the undervalued ruble undoubtedly reflects a significant political risk premium priced in it. It serves as a buffer in the event of growing political risks in the Russian Federation.
Nevertheless, possible sanctions from Western countries still pose the greatest threat to the Russian currency. Due to the recent accusations of hacker attacks and poisoning of Russian opposition figure Alexei Navalny, US President Joe Biden may well adopt a tough stance against Russia.
