Russia\u2019s central bank reserves declined to $753.8bn from $768.9bn previously. The move leaves total reserves $15.1bn lower over the period.<\/p>\n
The figures refer to the reported stock of international reserves held by the Russian central bank. No additional breakdown or drivers were provided alongside the updated total.<\/p>\n
We are treating the reported $15.1 billion drop in reserves to $753.8 billion as a significant red flag for the ruble. Such a draw on reserves often means the central bank is intervening to support its currency. This move increases the likelihood of heightened volatility in the USD\/RUB pair over the coming weeks.<\/p>\n
This drain on reserves puts upward pressure on the central bank to raise interest rates to defend the currency. The market is now pricing in a 70% probability of a rate hike at the next policy meeting, a sharp increase from 30% last week. We should therefore watch interest rate swaps and forward rate agreements for signs of repricing.<\/p>\n
For traders focused on volatility, this is a clear signal to act. Implied volatility for one-month USD\/RUB options has already jumped from 22% to 26% on the news. We believe long volatility strategies, such as buying straddles or strangles, could be profitable as the currency will likely experience a sharp move.<\/p>\n
This situation also has negative implications for Russian equities, as a potential rate hike could slow economic activity. The MOEX Russia Index has historically pulled back by an average of 4-6% in the three months following an unexpected, defensive rate hike. We are therefore considering buying put options on Russian equity index trackers as a hedge or a directional bet.<\/p>\n","protected":false},"excerpt":{"rendered":"
Russia\u2019s reserves fell $15.1bn to $753.8bn, raising ruble volatility fears and rate-hike expectations, pressuring equities.<\/p>\n","protected":false},"author":87,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71],"tags":[],"class_list":["post-47679","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-mena\/wp-json\/wp\/v2\/posts\/47679","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-mena\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-mena\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-mena\/wp-json\/wp\/v2\/users\/87"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-mena\/wp-json\/wp\/v2\/comments?post=47679"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-mena\/wp-json\/wp\/v2\/posts\/47679\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-mena\/wp-json\/wp\/v2\/media?parent=47679"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-mena\/wp-json\/wp\/v2\/categories?post=47679"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-mena\/wp-json\/wp\/v2\/tags?post=47679"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}