Ruble, Bad Boy of Currencies, Finds Love in UBS Asset Manager

  • Rout excessive, ruble seen at 73/$ in three months, UBS says
  • Brent climbs from 2003-low as investors search for bottom

Guess which asset manager loves the ruble, the bad boy of currencies? UBS Wealth Management.

The UBS unit advising high net worth clients is undeterred by the plunge to a record low of the biggest currency loser in emerging markets this year. In fact, it predicts the ruble is poised for a comeback and plopped the ruble among its top five most-preferred developing nation currencies.

The ruble will strengthen to 73 per dollar in the next three months and advance to 70 per greenback in the next six to 12 months, said Jorge Mariscal, the emerging-markets chief investment officer at UBS Wealth Management, which oversees $1 trillion, on Thursday.

Mariscal, who has focused on emerging markets for more than two decades, likes the ruble against the U.S. dollar and Australian dollar.

“It’s a combination of the ruble having perhaps gone a little too far and our constructive view on oil in the medium term,” Mariscal said by phone from New York. “Those are very interesting returns against the U.S. dollar if they materialize. We see very few other areas that could offer that kind of return in the emerging-market currency universe.”

Oil Correlation

The drop in the price of oil this year is putting pressure on Russia’s economy, which gets about half its budget revenue from oil and gas sales. The correlation between the ruble and Brent crude stood at 0.7, near an all-time high. A figure of 1 would mean they were moving together. So if you anticipate crude rebounding, you can bet on the ruble bouncing back too.

Brent crude, the grade traders use to price the nation’s largest export blend, advanced 4.9 percent to to $29.25 a barrel. Oil is still down 21 percent this year. The ruble rebounded from an all-time low, adding 1.9 percent to 81.0930 versus the dollar as of 11:03 a.m. in Moscow on Friday.

Another factor for investors to consider: monetary policy makers deciding to give the struggling currency a lift. Bank of Russia’s Governor Elvira Nabiullina said in an interview this week that the ruble was approaching “fundamental levels” that didn’t require intervention unless “risks to financial stability” appeared.

The central bank “clearly could come in and intervene, which is another reason to be somewhat constructive about the medium term,” Mariscal said. “If the ruble depreciates another 10 percent, I would not be surprised if they begin to try to prop it up a bit.”

That view reflects the findings of a Bloomberg poll in which a median of 15 analysts said the currency would need to weaken about 10 percent to 90 against the dollar for the central bank to step in.

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