USD/RUB hovers around 133.00 amid indecision over Russia-Ukraine crisis, firmer yields

• USD/RUB struggles for clear directions after easing from the record top.
• Moscow-Kyiv diplomats cite upbeat progress on peace talks but Ukraine President Zelenskyy emphasizes more Russian sanctions.
• IMF’s Georgieva backs chatters over Russian default but turns down global fears due to the same.
• US 5-year Treasury yields rose to a 34-month high, inflation expectations refreshed record top ahead of this week’s key FOMC.

USD/RUB treads water around 133.00 during Monday’s Asian session, following a four-day retreat from the all-time high.

In doing so, the Russian ruble (RUB) struggles amid mixed concerns over the geopolitical tussles with Ukraine, as well as the US Treasury yields’ performance ahead of the much-awaited Fed verdict.

Although headlines from Reuters confirm the brightest progress on the Ukraine-Russia peace talks, Sputnik shared comments from the Russian Foreign Minister (FM) seems to have poured cold water on the face of optimists. “Moscow will not ask western sanctions to be lifted, pressure will not change its course,” said Russian FM per the news.

It should be noted, however, that the diplomats from the US and China agreed to meet in Italy for the first time since the Ukraine-Russia tussles escalated, which in turn keeps markets hopeful and weigh on the US dollar’s safe-haven demand.

On the contrary, comments from International Monetary Fund Managing (IMF) Director Kristalina Georgieva, citing odd of the Russian default, were favoring the USD/RUB bulls. “Russia may default on its debts in the wake of unprecedented sanctions over its invasion of Ukraine, but that would not trigger a global financial crisis,” said IMF’s Georgieva during the CBS's "Face the Nation" program per Reuters.

Amid these plays, the S&P 500 Futures rise 0.65% to 4,228 to print the first positive daily performance in three. On the same line were the US Treasury yields as the 10-year coupon rose 3.3 basis points (bps) to 2.04% whereas the 5-year yields rose beyond 2.0% to the highest since May 2019.

Other than the Ukraine-Russia tussles, increased hopes of a 0.50% rate-hike during this week’s Federal Open Market Committee (FOMC)  also the USD/RUB bulls hopeful. As a result, the CME’s FedWatch Tool mentions around 95.0% probabilities backing the said decision from the Fed. The upbeat expectations also take clues from the recent record high US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data.

While the geopolitical headlines will join the Fed-linked woes to direct short-term USD/RUB moves, a light calendar on Monday and mixed headlines may trouble the pair traders.

Technical analysis

A convergence of the 10-DMA and a two-week-old support line restricts short-term USD/RUB downside around 125.00.