Sanction risks from EU and US keep RUB undervalued – TDS

"The Russian ruble remains about 16% weaker than a year ago, following a rollercoaster year in 2020," note TD Securities analysts.

Key quotes

"Long-RUB positions funded in USD lost 12.5% in the past 12 months. Only BRL did worse with a total loss of 20%. For comparison, the ZAR underperformed the group in the first wave of the Covid emergency until end of April. It then recovered more evenly, however. ZAR is now down only 3% on a spot basis and up 1% on a carry basis vs 12m ago."

"Surely, the RUB is one of the several casualties of the oil selloff of last year. Since the Jan 2020 peaks at around $70/bbl, Brent is now down only 18%. This means Brent recovered a staggering 191% from the April lows at around $20/bbl."

"Correlations should have supported the RUB to stronger levels by now. It's likely that sanction risks from the EU and the US (including, but not exclusively because of the Navalny case) are keeping the RUB undervalued and below FV for now."