LONDON: The Russian ruble may be poised to weaken against the dollar, with signs that domestic interest rates may fall as economic growth slows.
A move back toward the bottom of the ruble’s daily ichimoku cloud at 30.45 may be an initial objective with the top of the cloud, 30.97, beyond that.
Even that would only be a partial reversal of a move that has seen the Russian currency strengthen from 31.8470 on Nov. 13 to 29.8300 on Feb. 1.
Friday’s Russian industrial output data showed a surprise fall in January, adding to signs that Russia’s economic growth is fast losing momentum.
Output fell 0.8 percent year-on-year, in stark contrast to the forecast of 1.7 percent expansion in a Reuters poll taken at then end of last month.
Even allowing for the fact that a succession of public holidays in January always means less working days, seasonally-adjusted output was down 1.5 percent on the month, the largest monthly drop for more than a year.
That fall in industrial output follows data, released on Jan. 29, showing the Russian economy grew 2.4 percent in December and prompting a revealing comment from Deputy Economy Minister Andrei Klepach.
“The trend toward a slowing of the tempo of growth is continuing,” he said, adding that he saw an argument for Russia’s central bank to adopt “a certain easing of monetary and credit policy.”
The outgoing chairman of the Russian central bank, Sergei Ignatyev, who will retire in June, seems to be leaning in that direction too, hoping that price pressures will ease and afford room for easier monetary policy.
“I very much hope that inflation will start to come down in the coming months and after that — I hope but I can’t say definitely — we will start cutting interest rates,” he said on Friday.
If Russia’s producer price index is any indicator of broader inflationary pressure, Ignatyev may get his wish. The PPI was down 0.4 percent month-on-month in January after falling 1.1 percent in December, the Federal Statistics Service said on Monday. Analysts had forecast a rise of 0.2 percent.
Alexei Ulyukayev, the central bank’s First Deputy Chairman, has already said he expects inflation to peak in February.
But while the Russian central bank may be leaning toward easing monetary policy, the US Federal Reserve may be edging toward reining in expectations of continued monetary largesse in the form of asset purchases.
Wednesday’s publication of the minutes of the Jan 29-30 Federal Reserve Open Market Committee meeting may prove illuminating, but there have already been indications that some Fed officials are adjusting their thinking.
Chicago Fed President Charles Evans, a voting member this year on the Fed’s policy-setting panel and a consistent supporter of the US central bank’s ultra-loose monetary stance may be slightly shifting his viewpoint.
While Evans does not expect US unemployment to fall to around 7 percent until late 2014, the Fed could ease up on its asset purchases before then, he said on Feb 7.
Intriguingly, Cleveland Fed President Sandra Pianalto said on Friday it would be wise to reduce the Fed’s level of asset purchases before year end if the economy keeps improving.
As Evans and Pianalto are both regarded, although to differing degrees, as proponents of the Fed’s ultra-accommodative stance, such comments may be telling signs that the central bank is seeking to send a message to the market.
Adding the US side of the equation to the Russian, perhaps the sum total is a higher dollar against the ruble.
— Neal Kimberley is an FX market analyst for Reuters. The opinions expressed are his own.
