The ruble is trying to break out of the sell-off spiral and rebound from severe losses. There are indications of stabilization on the equity markets. This suggests that investors are hoping that the conflict between Russia and the West, the arena of which is eastern Ukraine, will stop evolving into a full-fledged war. In the face of geopolitical tensions reaching their zenith, trading participants tended to steer clear of emerging market currencies over the euro, preferring the franc and the dollar. That may now be changing.
Ruble: relief rally after the announcement of sanctions
The first tranche of sanctions on Russia imposed by the United States, the European Union and the United Kingdom in response to the recognition of the independence of separatist para-states is perceived as not very severe. They focus on access to financial markets, individuals, and Germany has indefinitely postponed the Nord Stream 2 gas pipeline certification. The West has clearly not set its sights on the harshest of retaliation. Measures such as cutting off the Russian financial system from the international SWIFT payment system are kept in reserve if the conflict continues to escalate.
Its solution by diplomatic means seems unrealistic at the moment. The summit between the Presidents of the United States and Russia, which was hoped for two days ago, now seems unrealistic. Besides, Secretary of State Antony Blinken cancelled the planned talks with the head of the Russian Foreign Ministry, Sergei Lavrov. The rebound of the ruble and the sharp drop in USD/RUB and the Russian stock market are a sign that the financial markets were prepared for a harsher reaction from the West. At the same time, investors' behaviour can be interpreted as the Kremlin taking the path of destabilizing eastern Ukraine and a creeping conflict rather than a full-fledged invasion. In such a scenario, geopolitical tensions will remain at elevated levels for a long time, which will be reflected in the ruble valuation and its volatility. Global markets without a constant flow of top-level information may pass over the situation in Ukraine and only periodically focus attention on this topic. Such fading of interest would be positive for the zloty and other currencies of the region and the Swedish krona.
This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.
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14 Feb 2022 8:09
Dollar and franc driven by war fears, ruble and zloty go below in red (Daily analysis 14.02.2022)
The ruble is trying to break out of the sell-off spiral and rebound from severe losses. There are indications of stabilization on the equity markets. This suggests that investors are hoping that the conflict between Russia and the West, the arena of which is eastern Ukraine, will stop evolving into a full-fledged war. In the face of geopolitical tensions reaching their zenith, trading participants tended to steer clear of emerging market currencies over the euro, preferring the franc and the dollar. That may now be changing.
Ruble: relief rally after the announcement of sanctions
The first tranche of sanctions on Russia imposed by the United States, the European Union and the United Kingdom in response to the recognition of the independence of separatist para-states is perceived as not very severe. They focus on access to financial markets, individuals, and Germany has indefinitely postponed the Nord Stream 2 gas pipeline certification. The West has clearly not set its sights on the harshest of retaliation. Measures such as cutting off the Russian financial system from the international SWIFT payment system are kept in reserve if the conflict continues to escalate.
Its solution by diplomatic means seems unrealistic at the moment. The summit between the Presidents of the United States and Russia, which was hoped for two days ago, now seems unrealistic. Besides, Secretary of State Antony Blinken cancelled the planned talks with the head of the Russian Foreign Ministry, Sergei Lavrov. The rebound of the ruble and the sharp drop in USD/RUB and the Russian stock market are a sign that the financial markets were prepared for a harsher reaction from the West. At the same time, investors' behaviour can be interpreted as the Kremlin taking the path of destabilizing eastern Ukraine and a creeping conflict rather than a full-fledged invasion. In such a scenario, geopolitical tensions will remain at elevated levels for a long time, which will be reflected in the ruble valuation and its volatility. Global markets without a constant flow of top-level information may pass over the situation in Ukraine and only periodically focus attention on this topic. Such fading of interest would be positive for the zloty and other currencies of the region and the Swedish krona.
See also:
Dollar and franc driven by war fears, ruble and zloty go below in red (Daily analysis 14.02.2022)
Exchange rates after another shock; the dollar saved (Daily analysis 7.02.2022)
Dollar starts to plunge; Wall Street rises sharply (Daily analysis 2.02.2022)
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