Wednesday, June 8, 2016

I hope Russia cuts rates on Friday. I want to buy the ruble.

Tom doesn't think it will happen. I'm hoping it will.

A rate cut is bullish for the ruble; not the opposite.

Personally I hope Nabiullina cuts the rate and Forex traders knock the ruble down because I am going to buy it.

Check the chart out below. These are ruble futures trade on the CME. The current futures price correlates to 63.85 rubles to the dollar. You can see that is down from 87.95 back in January. (Ruble has appreciated.)

Could be already factoring in a rate cut.


Tom Hickey said...

Tom doesn't think it will happen. I'm hoping it will.

If I conveyed that in what I wrote, I need to clarify it. What I said was, "Maybe.

Mercouris seems pretty sure about it. I hope he is right.

I think this needs to be added to what he says.

Nabiullina is very cautious. Although there is a lot of political pressure on her to cut, central banks are independent even in Russia.

I suspect that she is nervous about cutting when Yellen may raise, on the assumption that the ruble might drop more against the rising USD than she us comfortable with.

Nabiullina is trying to stabilize the currency in the range it has recently been trading in. For planning purposes, business wants stable inflation, preferably low, alone with a stable exchange rate. This is what she is aiming at, taking it as her mission as central bank chief.

I have been watching her for some time and I have concluded this is how she thinks. That's an educated guess.

So this is a bit of a quandary for her, and she may wait to let Yellen act first. As I see it, if Nabiullina waits and Yellen raises, then Nabiullina will not cut. If Yellen stands pat, then Nabiullina will cut.

Matt Franko said...

"You can see that is down from 87.95 back in January. "

Bottomed with oil price in USD terms... bank assets of financed oil inventories in USDs have been increasing in value so those banks can net shed USD RBS assets ("sell USDs") while still being able to maintain their target constant capital:asset ratio...

Tom's link says they are at 11% so even if they cut to 10% that is still a very generouse Risk Free Rate... imo not much change to Russian domestic situation at 10% vs 11%... still double digits... US savers should only be so lucky...