Tyler Durden: Having made new record lows for 7 days in a row, various technical triggers, short squeezes, and rumors of Central Bank intervention prompted the Russian Ruble to rally over 5% – the biggest swing since 1998 as chatter of a very aggressive (greater than 50bp) rate-hike at tomorrow’s meeting.
Massive shortr squeeze
And intraday the move is immense!
Commerzbank suggests intervention:
…looks like either a substantial one-off central bank FX intervention, or indirect intervention to the local banking community, Simon Quijano-Evans, head of EM Research at Commerzbank.
If RUB recovery is not due to any geopolitical progress, a strong message in defense of the RUB is needed in tmrw’s CBR meeting: Quijano-Evans.
This would include a rate hike of at least 200bps, and/or one-off FX interventions, and dropping the corridor policy.
UBS’ EM desk suggest 3 drivers:
a) hope of rapproachment between Ukraine and Russia.
b) risk that central bank hikes rates very aggressively tomorrow.
c) expectations that oil price isn’t going much lower from here; small tactical rally is possible near term.
And technical drivers:
“Ruble may be poised to appreciate against the U.S. dollar in coming weeks after the slow-stochastics study, which measure the velocity of a security’s price movement, exhibits a bullish crossover near the oversold threshold,” says Bloomberg Technical Analyst Sejul Gokal. “A similar crossover in March this year, led to a 6.2% appreciation of the the Russian ruble versus the greenback, over a period of 13-weeks.”
As Goldman adds,
The sharp decline in the Ruble and US$28bn in reserve losses month-to-date are likely to be of significant concern to the CBR, given related risks to financial stability as well as to inflation expectations, and we think this is likely to cause the CBR to enact decisive changes to its FX policy.