Commerzbank analyst Tatha Ghose highlights recent changes in Russia's foreign exchange market, noting that the central bank has shifted the EUR/RUB pricing mechanism to derive from USD/RUB due to sparse trading volume following sanctions on the Moscow exchange (MOEX) [1]. Ghose points out that this adjustment may not be entirely practical, as there is arguably no functional USD/RUB exchange rate either, and suggests that oil exports provide only a weak anchor for USD/RUB valuation. He further observes that hard currency FX markets in Russia are not fully operational under current conditions [1].
The Ruble has recently been supported by improved oil and gas revenues, with the Urals oil price averaging approximately $90 per barrel during April and May 2024 [1]. This elevated oil price has bolstered the exchange rate in the short term. However, Commerzbank forecasts that oil prices will decline by the end of the year, removing this temporary support for the Ruble [1].
Looking ahead, Ghose warns that once the oil price 'bonanza' subsides, Russia's weakening economy is likely to exert renewed pressure on the currency [1]. No specific market reactions or analyst opinions beyond Commerzbank's outlook are provided in the article.
CONCLUSION
Commerzbank expects the Russian Ruble's current strength, driven by high oil prices, to be temporary, with a weaker economy and declining oil prices likely to pressure the currency later in 2024 [1]. The central bank's recent changes to FX pricing mechanisms reflect ongoing challenges in Russia's hard currency markets. Investors should be cautious about the Ruble's outlook as oil support fades.