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Market Strategy

Russia’s Impossible Trinity—Calling for Further RUB Strength

By Natalia Gurushina, Rachel Ziemba and David Rogovic
Oct 12, 2010 12:00:00 PM | Last Updated

  • RGE believes that higher than expected inflation will leave the CBR with few alternatives to raising its policy rate and allowing the RUB to appreciate further against USD, despite concerns about a lukewarm recovery. RGE therefore recommends being short USD/RUB (via 12-month NDF) and paying a 2-year cross-currency swap in Russia.
  • As we expected, headline inflation in Russia reversed direction in August, rising to 6.2% y/y (after 5.5% y/y in July) and reaching 7.0% y/y in September. Although high food prices exacerbated conditions, core inflation also started to rise, reaching[...]

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