RUB expected to edge higher in the longer run – Danske Bank

Strategist at Danske Bank Vladimir Miklashevsky sees the Russian currency gathering further traction in the long term horizon.

Key Quotes

“According to the confirmed preliminary data, Russia’s GDP shrank 0.6% y/y in Q2 16 versus a 1.2% y/y fall a quarter earlier as details by economic activity have been published. Agriculture expanded 2% y/y, manufacturing, mining and quarrying by 0.3% y/y while construction shrank 9.5% y/y, wholesale and retail fell 1.2%. In January-July 2016, the economy shrank 0.9% y/y, contracting 0.1% m/m S.A. in July as manufacturing and wholesales growth was negative. We keep our 2016 GDP growth forecast at -0.6% y/y (given the Brent year average at USD48.6/bl) and 2017 GDP growth at 1.2% y/y”.

“Russia’s currency profited from the post-Brexit emerging markets rally, diverging from the crude price. We continue to be moderately bullish on the RUB in the long term. However, the political risk and possible intensification of Western sanctions should be constantly kept in mind, as possible ‘black swan’ events could prevail over fundamentals”.