MaRaging Partners expect lower USD/RUB by the end of Q4 2014

Thursday, 23 October 2014 16:49

MaRaging Partners, a Moscow-based currency consultancy, have published their FX market view for Q4 of 2014. The report covers EUR/USD, USD/RUB, and EUR/RUB, and combines news-based and quantitative approaches. Maraging Partners expect lower USD/RUB by the end of Q4 2014:

"As we noted in the previous issue, investing in Russia brings about risks of own government reprisals for the residents of Euro - Atlantic countries. Investors able to enter Russia under the radars of Euro - Atlantic governments, for example, via Hong Kong or Singapore, find themselves in an exceptional position and, according to market laws, are reaping a peculiar form of rent, known as protection rent. Today's exceptionally low rouble exchange rate reflects not so much the macroeconomic and geopolitical risks to Russia's economy -- after all, these have not gotten worse because of a territorial enlargement -- as they provide the protection rent, creating a super - attractive entry point for such investors. This rent is paid for largely by those who create the artificial entry barriers responsible for the protection rent. The payment is a form of an opportunity cost. The exceptional position of such investors is unlikely to last long, because the laissez faire investment climate of these jurisdictions can easily attract more participants. This is a question of changing the business domicile, and for many investors with interests in Russia, who control, as we know, capitals of Russian origin, already re - domiciled at least once, this is a question of time. In such a scenario, the rouble weakness which is part of the mechanism of the protection rent, will also be short lived. Thus the barriers called upon to create artificial costs for Russia, in fact, amplify and accelerate the Eastbound exodus of wealth and power from the West.

It seems to us that one of the investment themes of the Q4 will be monetization of the protection rent. To be able to take part in this process, one has to begin selling USD and EUR forward already today."

See full text of the report on the Maraging Partners web site.

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