LONDON: Investment bank Goldman Sachs said on Monday it was raising its forecasts for the rouble, predicting it would trade at 62 per dollar in 12 months time, almost 10 percent stronger than current levels.
The rouble stands at around 68 per dollar and Goldman's previous 12-month forecast was for 66 per dollar. The bank said in a note it now expects the currency to trade at 66 in six months, compared with a previous prediction of 75.
"Given the central bank wants to hold back on delivering rate cuts, it's a currency-supportive environment," said Goldman Sachs' managing director for emerging markets research Kamakshya Trivedi.
Steadier oil prices and a dovish U.S. Federal Reserve were also helping, he added.
Russia left interest rates at 11 percent last week and struck a hawkish note, saying that to achieve inflation targets, monetary policy could remain tight for "a more prolonged time than previously planned".
Russian 10-year bond yields have dropped more than 200 basis points since mid-January to 21-month lows on bets that falling inflation would allow interest rates to fall.
"At some point Russia becomes a bond trade, especially if the rouble goes beyond 62 over 12 months. It's probable the central bank won't want to see a much stronger currency, then it becomes a rates trade as they will start delivering rate cuts," Trivedi said.
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