POLL-Russian rouble's fair value, without recent geopolitical fears, seen at 71 vs dollar

Credit: REUTERS/MAXIM SHEMETOV

By Andrey Ostroukh and Elena Fabrichnaya

MOSCOW, April 14 (Reuters) - The Russian rouble, which fell as geopolitical concerns grew over the past few weeks, is now some 6% weaker than its fair value seen at around 71 versus the U.S. dollar, a Reuters poll showed on Wednesday.

The rouble decoupled recently from moves in other emerging markets as well as in the price of crude oil, Russia's key export, amid fears about Russia's military buildup on the Ukrainian border.

The rouble hit a five-month low of 78.0450 against the dollar on April 7, recovering to 75.70 on Wednesday after U.S. President Joe Biden proposed to his Russian counterpart Vladimir Putin that they hold a summit to tackle a raft of disputes.

The rouble and Russian bonds had earlier taken a hit after Biden said in mid-March that Putin would "pay a price" for efforts to meddle in the 2020 U.S. presidential election, allegations that Moscow denies.

All 11 analysts and economists polled by Reuters in mid-April said the rouble was undervalued after the latest sell-off, putting its fair value - given oil prices levels, the COVID-19 pandemic and the globally stronger dollar - at between 66 and 75 against the greenback.

If the rouble's value is compared to other emerging market currencies and the Norwegian krone, a loss of non-residents' interest in Russian assets since mid-March cost the rouble 5-6% of its value, said Maxim Petronevich, chief economist at Otkritie Research.

"We think the rouble is undervalued by 7-10% versus its long-term equilibrium level and current oil prices," said Sofia Donets, chief economist at Renaissance Capital.

The rouble is also pressured by Russia's fiscal rule, under which the finance ministry buys foreign currency for its state coffers on a daily basis when Urals crude oil prices are above $43.3 per barrel URL-E.

"Without geopolitical risk, the USDRUB should be at 67, and, on top of that, without a fiscal rule the USDRUB should be at 61," Citi economist Ivan Tchakarov said.

In early 2020, when oil prices stood near current levels, the rouble was at around 63 to the greenback.

Its weakness filters into consumer prices and dents living standards, while prompting Russia's central bank to consider raising rates. But it also buttresses the budget as it generates more revenues from selling commodities abroad for dollars.

(Writing by Andrey Ostroukh Editing by Bernadette Baum)

((andrey.ostroukh@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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