Ruble, Hryvnia and Kazakh Tenge to Gain on Drought
August 11, 2010, 12:24 PM EDT
By Emma O’Brien
(Adds non-deliverable forwards in seventh paragraph.)
Aug. 11 (Bloomberg) -- The ruble will strengthen more than 9 percent against the dollar and the Ukrainian hryvnia and Kazakhstan’s tenge will rise about 5 percent as central banks allow the currencies to appreciate to combat quickening inflation led by food prices, Goldman Sachs Group Inc. said.
The ruble, which closed at 30.05 per dollar yesterday, may strengthen to 27.5 over the next 12 months, analysts led by London-based Anna Zadornova wrote. The hryvnia could rise to 7.5 per dollar in the next six months, from 7.89 per dollar yesterday, and the tenge may strengthen to 140 per dollar over the next year, from 147.32 today, Zadornova wrote.
Russia’s worst drought in five decades and bad weather in Canada could lead to 36 percent-higher wheat prices over the next three to 12 months compared with the average price in the first half of this year, Zadornova wrote in the note, e-mailed late yesterday. All three countries buy and sell dollars and euros to prevent currency swings that harm exporters and undermine confidence in the exchange rate. A stronger currency helps combat inflation by reducing prices of imports.
Bank lending is still “depressed” in Ukraine and Kazakhstan, and the prospect of higher rates is “premature,” Zadornova wrote in the note. “However, given relatively higher inflation risks, the central banks may view currency appreciation as more acceptable to curb short-term inflation pressure.”
‘Bullish View’
The ruble weakened 0.8 percent to 30.29 per dollar by the 5 p.m. close of trading in Moscow and added 0.3 percent to 39.36 per euro. That left it 0.2 percent stronger at 34.37 versus the dollar-euro basket used by the central bank to manage the ruble. The hryvnia was little changed and traded at 7.89 per dollar. The tenge fell 0.2 percent to 147.5 per dollar.
Bank Rossii is already scaling back its foreign currency purchases, a sign it is willing to allow ruble strength, which “reinforces our bullish view on the ruble,” Goldman said.
Investors increased bets that the ruble will weaken today, with non-deliverable forwards showing the currency at 30.64 per dollar compared with yesterday’s 30.2225 per dollar, the biggest decline in three-month NDFs since June 4. The contracts, known as NDFs, are a way of gauging market expectations of a currency’s movements as they allow companies to hedge against possible fluctuations in an exchange rate and foreign investors to speculate on currencies in countries that limit their participation in the markets.
Russian inflation, which hit a record low annual 5.5 percent last month, will probably accelerate by 1.3 percentage points this year, Zadornova wrote. Inflation in Ukraine and Kazakhstan may quicken by 1.8 percentage points, Goldman said, from 6.8 percent and 6.7 percent respectively last month.
August 11, 2010, 12:24 PM EDT
By Emma O’Brien
(Adds non-deliverable forwards in seventh paragraph.)
Aug. 11 (Bloomberg) -- The ruble will strengthen more than 9 percent against the dollar and the Ukrainian hryvnia and Kazakhstan’s tenge will rise about 5 percent as central banks allow the currencies to appreciate to combat quickening inflation led by food prices, Goldman Sachs Group Inc. said.
The ruble, which closed at 30.05 per dollar yesterday, may strengthen to 27.5 over the next 12 months, analysts led by London-based Anna Zadornova wrote. The hryvnia could rise to 7.5 per dollar in the next six months, from 7.89 per dollar yesterday, and the tenge may strengthen to 140 per dollar over the next year, from 147.32 today, Zadornova wrote.
Russia’s worst drought in five decades and bad weather in Canada could lead to 36 percent-higher wheat prices over the next three to 12 months compared with the average price in the first half of this year, Zadornova wrote in the note, e-mailed late yesterday. All three countries buy and sell dollars and euros to prevent currency swings that harm exporters and undermine confidence in the exchange rate. A stronger currency helps combat inflation by reducing prices of imports.
Bank lending is still “depressed” in Ukraine and Kazakhstan, and the prospect of higher rates is “premature,” Zadornova wrote in the note. “However, given relatively higher inflation risks, the central banks may view currency appreciation as more acceptable to curb short-term inflation pressure.”
‘Bullish View’
The ruble weakened 0.8 percent to 30.29 per dollar by the 5 p.m. close of trading in Moscow and added 0.3 percent to 39.36 per euro. That left it 0.2 percent stronger at 34.37 versus the dollar-euro basket used by the central bank to manage the ruble. The hryvnia was little changed and traded at 7.89 per dollar. The tenge fell 0.2 percent to 147.5 per dollar.
Bank Rossii is already scaling back its foreign currency purchases, a sign it is willing to allow ruble strength, which “reinforces our bullish view on the ruble,” Goldman said.
Investors increased bets that the ruble will weaken today, with non-deliverable forwards showing the currency at 30.64 per dollar compared with yesterday’s 30.2225 per dollar, the biggest decline in three-month NDFs since June 4. The contracts, known as NDFs, are a way of gauging market expectations of a currency’s movements as they allow companies to hedge against possible fluctuations in an exchange rate and foreign investors to speculate on currencies in countries that limit their participation in the markets.
Russian inflation, which hit a record low annual 5.5 percent last month, will probably accelerate by 1.3 percentage points this year, Zadornova wrote. Inflation in Ukraine and Kazakhstan may quicken by 1.8 percentage points, Goldman said, from 6.8 percent and 6.7 percent respectively last month.