JPMorgan Chase & Co. strategists have dismissed their earlier long recommendation on the Russian ruble, given the escalating tensions over Ukraine.
- Strategists Anezka Christovova and Michael Harrison said the long recommendations have become “untenable” and that the negative scenarios cannot be dismissed with high confidence.
- The ruble has declined by over 5% in January, forcing the central bank to stop regular foreign-currency buying for its wealth fund to prevent pressure on the local currency.
- The strategists noted that data indicate that inflation may be peaking, but more evidence is needed as false signals were seen previously. A reduction in geopolitical uncertainty and clearer guidance on inflation is needed to boost bonds.
The ruble is undervalued 13%, with 10-year local-currency sovereign bonds cheap by over 100 basis points.
Source: Bloomberg
