EUR/RUB to head towards 78 in 2021 – Danske Bank

Since 2020, the Russian rouble has been hit by rising inflation, stagnant growth and politics. Economists at Danske Bank forecast EUR/RUB at 78 in 12 months as headwinds could turn to tailwinds.

Key quotes

“For investors, RUB is a very imperfect substitute for other assets but we are nonetheless moving towards a point where spot stands out. As such, a continued move into especially commodity and high-beta FX is also an argument for RUB to catch up.”

“Rising inflation in Russia has been a problem for RUB but it may also be a short-term stabilizing factor. The central bank will try to keep inflation at bay and means they will try to support stability in USD/RUB e.g. by keeping expectations to a rate hike.” 

“The risk scenario is where Russia remains in stagflation (less so, new sanctions) as the US economy may pull ahead in H2, leaving RUB for a disappointment as US rates rise.” 

“One has to weigh the scope for recovery and positive surprises versus highlighting a poor track but we forecast EUR/RUB towards high 70’s in 2021. It is time for RUB to shine – but it requires the upbeat global themes to continue and Russian macro improve.”