Nomura tipped going short Russia’s ruble, citing country-specific factors as well as the rise in crude oil positioning.
“Long ruble positioning is crowded, with the latest CFTC data showing that investors have rebuilt their long ruble positions, almost to the extremes of late 2016 and early 2017,” it said in a note last week. “At the same time, crude oil longs have also been rebuilt and are approaching the all-time highs of 2016. This comes at a time when crude oil prices seem to have peaked.”
It noted the American Petroleum Institute (API) reported a major surprise build of 5.321 million barrels of U.S. crude oil inventories for the week ending 23 March, compared with analysts’ expectations for little change. That comes as U.S. output of oil has climbed so far this year to an all-time high of 10.4 million barrels a day, it added.
“Seasonal support for the ruble is also declining as we head into the second quarter, reflecting the seasonal deterioration in Russia’s external
balances,” it said.
Nomura also said that the ruble appeared 10-12 percent overvalued, consistent with where the ruble’s REER (real effective exchange rate) is trading.
And lastly, it noted that Russia faces political headwinds, with 21 countries so far announcing they expelled Russian diplomats to protest the poisoning of former double agent Sergei Skripal and his daughter Yulia in the U.K. in March. The Russian response could also spur further tensions, the bank noted.
Nomura said its trade idea was to buy a three-month USD/RUB 57.75 call with a 62.25 KO for a 0.69 percent notional, spot reference at 57.7; it said it allocated the equivalent of US$5 million to the trade.
The dollar/ruble was trading at 57.3410 as of Friday.