USD/RUB

I lost over 20 000 trading this pair, when first time Ukraine conflict broke out I bought USDRUB but it went from 36 to 33 I paid over 6000$ in just rollovers and spread (BEWARE!!!!) and lost another 6000 on trading, then when West introduced new Sanctions USDRUB spiked to 40, I assumed 40 was crucial and psychological level for Bank of Russia to defend and bought Ruble then I was earning on rollover but little (F*** Broker) and lost another 8000$.

So I am kinda scared of this currency

This is 100% political currency. FOrget technical analysis

I agree with this. In my opinion, the two factors most responsible for the currency's value at the moment are oil prices and real time development and perception of the political climate. The former depends on factors I'm sure everyone here has deeply rooted opinions on. The latter depends largely on the development of Russia's relationship and situation in Ukraine.

I'm Russian with family in Ukraine and have been trading the pair since June with a good degree of success. This is not a currency I would recommend for intraday traders or those incapable of maintaining significant cushions for sudden shocks. Therefore this is mostly geared toward others willing/able to hold on for a while, understanding the currency can easily swing to high $50's due to a "sudden escalation" in Ukraine or high $40's due to RCB's well-timed & significant intervention, in a very short period of time.

While I am frankly unsure of the timing and trajectory of oil prices, I do follow the conflict in Ukraine very closely. First, to be frank, the conflict is impossible to follow in real time for people who don't speak Russian/Ukrainian as most immediate information to its development that is not sensational tripe is from primary sources exclusively in those two languages (e.g. Ukrainian military commanders, separatist propaganda websites, etc). The situation on the ground takes weeks to move through English news channels.

Take it for what it's worth, but I believe the conflict in Ukraine is largely over. Put simply, RF gained pretty much complete control over all military elements fighting for the separatists and is trying to end the conflict while saving face. Kiev likewise has given up on trying to reclaim those areas. The west has given signals that sanctions will begin to be lifted once the situation on the ground begins to normalize and the killing stops. It has begun to normalize. So long as the west follows through with lifting some of the sector-wide sanctions on the RF as the fighting truly comes to a near-halt (which it mostly has, aside from just a few pockets, which are becoming more and more marginalized), I believe the market will correct the ruble's value.

Oil prices are of course a different discussion altogether. Oil prices clearly have a more significant correlation to the ruble's value than the political situation. The question is how much. What I believe you need to decide for yourself is how much of the ruble's value correlates to oil prices and how much of it depends on the political situation/lifting of sanctions and make trades accordingly. At least that's what's worked for me. My personal opinion is the CBR may shock the market once there are clear political signals of near-term reversal of sanctions or if it is successful with a rate hike. This would assures it gets the most bang for its buck.

Full disclosure: I'm short at cost basis of 53.8320 and at 20:1.

A good analysis, but capital outflow from Russia is very deep and killing for Russian economy. The pressure on Ruble is strengthened by ordinary people who desperately try to change their savings to foreign currencies

Very nicely put, I have been trying to follow the situation very closely and are currently shorting the hell out of the Ruble to the point where I have 19 short trades in play. I have been making some nice coin playing some longs while waiting for the correction and sanctions to lift.

Currently have four longs in play waiting for another 55 handle but will tread carefully after that as I think we have topped out for the time being, unless there is another major (WW3) situation.

The thing with oil is, the low prices will hurt the US and other countries Australia included just as much as Russia. And just how much has it hurt Russia, as stated by many smarter people than me.

1. Russia can ask for payment in gold for oil rather than RUB (something we think might be happening behind the scenes to a degree)
2. Lower Russian dollar means their oil is more attractive, cheaper (Yes even though some will say they do not refine it correctly)

I think a major correction is coming, maybe not today, not next week but very soon.
Just look at the ants getting all concerned again about Greece, S&P 500 dropping, oil prices and energy sector, Silver and Gold climbing. There is panic in the wind, and a little panic can turn into chaos very quickly.

Capital outflows are a serious problem. However, the effect of the ordinary people converting their savings to foreign currencies appears to be minimal. Bloomberg had an article about this not long ago:

"Russians also haven't been deterred from continuing to save money in Russian banks. According to official data, ruble savings grew for most of 2013 and 2014, and in early November, they stood higher than in January, at 20.5 trillion rubles ($378.3 billion at today's exchange rate, or $2,634 per capita). They were down slightly from the October level, mostly due to an outflow from banks. Yet investments in securities also grew -- 21 percent higher than in November than in January. Depositors are seeking higher returns than banks can offer, but that's hardly a sign of panic."
Source: http://www.bloombergview.com/article...-russians-yawn

However, investment is obviously risk averse. Uncertainty = risk. Until there is a clear improving trend to the political situation in Ukraine (and therefore a normalization with RF's relationship with the west), capital outflows in Russia will persist. Putin's most recent "hail-Mary" at offering amnesty to off-shore capital was uncharacteristically premature and futile in this context.

A point that I have not touched on is Russia's cost to refinance roughly $120 billion USD coming due next year. This will put upward pressure on the USD, especially now that sanctions made it more difficult for the RF to refinance debts. I believe the market has largely priced into account that sanctions may remain through all of next year and Russia will be forced to repay the debt through alternative sources.

I don't believe the sanctions will remain for very long. What I see is the west is looking for a politically feasible resolution and normalization of relations with Russia (hence no new sanctions in early November, despite the most seemingly blatant and irreversible escalation in Ukraine to date). I base this based on the following:

1. Sanctions are less effective as time goes on and alternative (albeit more costly) sources are found.
2. They are causing the opposite political effect in Russia (i.e. more support for Putin due to "under-siege" mentality).
3. It is in the west's interests to have Russia involved and cooperative in a political resolution to the Iran and ISIS issue.
4. Many of the Europeans are increasingly vocal about the impact this has had on them (e.g. Austria, Vienna, Hungary, et al due to cancellation of South Stream and France due to the Mistrals).
5. Ukraine's economy is on the verge of collapse. The Europeans, the US, and the IMF have no desire to bail them out; however, they are all politically (and financially) invested in Ukraine at this point. Nobody wants to see the country collapse. People's focus on Russia's military involvement; however, it is far more important to recognize that Russia can make things a lot more difficult (an understatement) for Ukraine's economy. Therefore, a solution to getting Ukraine out of its economic mess requires Russia's cooperation. Russia will (and I believe has) leveraged this in its fight to get the sanctions lifted.

Assuming the oil prices will not remain <$60, I believe the ruble's value will improve once the political situation is perceived to be moving in the right direction..

By the way, those wanting a chuckle can read what analysts think the CBR will do at their meeting. In short, prediction are hilariously all over the place: http://www.wsj.com/articles/BL-MBB-30656

Meeting is set to take place 10:30 AM GMT

Do nothing? They cannot manage inflation element triggered by currency fluctuations of such proportion and interest rate plays are unlikely to compensate for fundamental/political factors currently at play. They decided to let the currency float, so it floats.


Sanctions introduce a sort of force majeure situation as they disrupted normal business plans. I figure they might consider doing legislative refinancing. While it is not capital flow control such move will eliminate outflows which in normal circumstances would be matched with corresponding inflow. In a sense offsets a politics driven obstruction with a politics driven solution.

haha a new high!

time to grab the popcorn

Now it is about the time for a correction. CBR raised oneweek repo by 1%.... it'll have zero effect in the longer term. However, I would wait for the 50ys to take longs again. Russia's economy is in the deep sh*t and there will be no recovery for a long time. Won't be surprised to see ruble down at around 70 by the end of the Feb, 2015.

Keep shorting.

Any market correction will not take place, all corrections which occured were due to CBR interventions, you can see it in CBR data:http://www.cbr.ru/Eng/hd_base/Defaul...tId=valint_day

If you want to play against the market it is your choice.

Thanks tomas for this url !!

What's this based on?

Regarding sanctions:

The US Senate just passed a bill authorizing the US president to impose more sectoral sanctions on Russia:
https://thehill.com/blogs/floor-acti...sanctions-bill

Obama however killed it and said the sanctions would be counterproductive. Obama also doesn't think EU will be on board:
http://www.washingtonpost.com/blogs/...aine-conflict/

Meanwhile, hostilities in East Ukraine have practically ceased for the first time ever. Ukraine's President Poroshenko announced there appears to be a "true ceasefire" for the first time.
https://news.yahoo.com/poroshenko-sa...033541687.html

I'm reading several reports from both sides that separatists began moving away several batteries of heavy artillery from the border areas. As a reminder, the EU and the US have both said sanctions can become to be removed if Russia cooperates with normalizing the situation in East Ukraine. I think removal of sanctions can go all the way into March, 2015 as EU commission is scheduled to officially meet to review the situation in East Ukraine then.

This is some very interesting insight, thank you for sharing.

Smashed through 58 easily! Let's get it to 70

I think that West will withdraw the sanctions only if there is a real change in Russian policy, I can imagine that step down of Putin in a few months is the olny way to normalize the situation between Russia and West.

And Oil need stop to go down and go back to 100$ quickly

Putin definitely won't step down and he has too much power and too much support to be removed.

Double Post

Quoting tomas.v

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I think that West will withdraw the sanctions only if there is a real change in Russian policy

Ignored

I don't mean to turn this into a political debate; however, I disagree as this doesn't appear to be the position of the US and the EU. First, the removal of Putin is not even a remotely feasible goal (despite the Kremlin's statements for domestic audience), even if Russia's economic situation worsens significantly. Essentially, fellow Russians are living a under a perceived siege from the west and will tolerate significantly worse economic conditions. This isn't even touching on the simple fact that there is absolutely no viable alternative/opposition to Putin for Russians to support (the next two "candidates" are the Communist Party and a crazy radical nationalist Zhirinovsky. The moderate/liberal pro-western parties have no support at all).

To be sure, I believe that certain sanctions will remain for political reasons. None of these will be more than symbolic, due to Russia's annexation of Crimea. Keep in mind all serious sanctions (on companies and sectors of the economy) were imposed due to the conflict in East Ukraine, not Crimea. The only sanctions imposed due to Crimea (an issue that I don't believe Russia and the West will ever come to an agreement on in our lifetime) were sanctions against certain political individuals. Those will probably remain almost indefinitely, even if sanctions tied to the economy are removed. Keep in mind that all serious sanctions imposed on Russia to this point have been done through Presidential Executive Order. This means they are easily repealed by a signature from one man (unlike the Jackson - Vanik Amendment passed by Congress in 1974 that took 28 years to repeal).

In fact, the US and the EU have both tied the lifting of sanctions on the implementation of the Minsk agreement (a ceasefire in East Ukraine). For example:

http://uatoday.tv/politics/biden-urg...er-393122.html
http://www.businessinsider.com/afp-o...ukraine-2014-9

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Biden said that sanctions against Russia, implemented by Ukraine's partners would not be lifted, until the Kremlin fulfils its obligations of the Minsk peace accords, of which they are a signatory.

Another important component to this is the sentiment of the Europeans, since Obama has said he will not act unilaterally without the support of the Europeans. While the sanctions have a minimal effect on Germany (the powerhouse of the EU), they have a real effect on other countries in the EU all of whom have been publicly looking for ways to deescalate, including France, Slovakia, Italy, Hungary, Czechs, Greece, etc. This discontent with the sanctions is threatening EU's alliance and puts a lot of pressure on Merkel (who already has a special relationship with Putin) to deescalate.

http://www.huffingtonpost.com/2014/1...n_6224782.html

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[Merkel]said the possibility of a cease-fire in east Ukraine remains far removed, "and therefore economic sanctions remain unavoidable and show that in our efforts to get through the crisis we will need patience and perseverance."

^If you read between the lines of political rhetoric and assess the current situation, a picture emerges. The ceasefire is taking hold since beginning of December and the fighting is dying down significantly (yesterday marked the first day in a long time with no Ukrainian army casualties).

However, I want to again emphasize that while the ruble's value is affected by the oil prices and the sanctions, the oil prices appear to have had a more significant effect. The sanctions are on a positive path to be resolved. The trend with the oil prices, in my opinion, are anybody's guess. In summary, if you feel the oil prices have bottomed out, buy the ruble as you will likely benefit from an improving political situation and stabilization of oil prices. The rollovers are also something else due to the interest rate disparity.

P.S. This discussion is incomplete without taking into account default risk due to a catastrophic drop in oil prices. In my opinion, such risk is almost non-existent until at least 2017, due to Russia's limited foreign debt obligations. Further, Russia hasn't exhausted its "nuclear" options (e.g. capital controls). So long as oil prices recover until then, those with a Carry/Long-Term strategy and ample funds will have opportunities to exit.