Most Accurate Forecaster Sees Turnaround for Oil-Battered Ruble

  • Nomura's Petrov cites homegrown demand from savers, companies
  • Others say worst not over for ruble ensnared by oil, recession

Oil Markets: Where Are Prices Headed?

The most-accurate ruble forecaster sees a turnaround for Russia’s currency as oil prices stem declines and local banks slow dollar purchases.

After the currency suffered losses of 20 percent in 2015 and closed at a record low last week, the worst is over for ruble traders, according to Nomura International Plc’s Dmitri Petrov. The analyst, whose team’s predictions were the best among 34 forecasters ranked by Bloomberg on a four-quarter rolling basis, expects a recovery that could make the exchange rate as strong as 67 against the dollar over the next three months from 74.7475 Friday and bring it to 65 by year-end. That compares with a consensus that puts the ruble at 69 for most of 2016.

“We think we are approaching the bottom in USD-RUB and our bias is to look for opportunities to buy the ruble in the coming weeks,” Petrov said from London. “If you have a portfolio and need to add some risk and are willing to stomach the volatility, it’s a very attractive case for 2016.”

RankFirmScore
1Nomura International75.15
2Promsvyazbank69.83
3Swissquote Bank64.97
4Sberbank CIB63.75
5Bank Julius Baer63.48

Petrov sees a recovery unfolding from drivers within Russia and possible inflows into cheap local assets, as a rush to convert household ruble savings into dollars abates. Other market watchers, including Barclays Plc, say the outlook for the ruble is clouded as the economy struggles to emerge from recession with oil languishing at the lowest level in almost 12 years, and slowing growth in China, Russia’s biggest trading partner. About 50 percent of Russia’s revenue comes from the sale of oil and natural gas.

Barclays cut its first-quarter ruble forecast to 76 per dollar from 71, as high domestic liquidity, low oil prices and poor economic performance weigh on the currency, according to a report on Jan. 6, the day before Brent crude fell to a 2004 low of $32.16 a barrel. The bank sees the ruble at 78 against the dollar at the year’s end.

The ruble weakened to 75.5610 against the dollar by 5:13 p.m. in Moscow as trading restarted after public holidays. That was the weakest level for the currency on an intraday basis since Dec. 16, 2014.

Dollar Recoil

Petrov’s forecast of 67-70 per dollar in the first quarter assumes crude prices steady at $35-$40 a barrel. Since sanctions triggered an exodus from Russia by foreigners, domestic players are exerting greater influence on the ruble, he said. Companies have less need to hoard U.S. dollars, as payments on foreign debts shrink to less than half the $30 billion they repaid in 2015 while sanctions froze Eurobond markets.

As Russians gravitate toward their own currency, foreign investors might also boost holdings of ruble assets, according to Petrov. Bank of America Corp. recommended Russian local debt to clients in a research note dated Jan. 7 after saying in December it’s a “good time” to add Russian stocks.

“The demand factor has really changed,” Petrov said. “The trend perspective in the currency from current levels is towards appreciation.”

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