Since September 2013, the regulator has been actively altering FX policy in order to reduce its influence on the rouble. Hence, the recent step was expected and bodes well the CBR’s goal to implement a fully-fledged inflation targeting framework by 2015. The CBR is likely to continue adjusting its intervention framework.
Following this decision, rouble adjustment to potential shifts in the market’s supply-demand balance are to become faster and cost less FX reserves. Thereby, interest rate policy is to become more efficient and the regulator might take more comfort in providing additional liquidity via non-standard refinancing vehicles (such as today’s three-month 312-P auction).
From a fundamental standpoint, the abolition of targeted interventions implies that the regulator does not have a specific equilibrium exchange rate target, which is logical on the way toward a free floated rouble.
Looking ahead, potential pressure from MinFin’s FX purchases (the amount is expected in the range of RUB 50-100bn) might be one of the major headwinds in the coming months, but favourable current account seasonality, still-high oil prices and Olympics-related spending is likely to, in our view, support the rouble over the first quarter. Hence, we maintain our forecast of 32.25 USDRUB by the end of March.