The Dollar Index yesterday hit the local high at 93.50, and by doing so it confirmed its intention to keep on climbing. The nearest target is at 94. However, on Tuesday later in the afternoon the tendency changed, but within an ascending trend.
The single currency today hit the local bottom at the 1.169 area, where a correction has started. A short-term reason for a change in the trend was the stabilization of the situation about the referendum in Catalonia. In addition, the macroeconomic statistics released have strengthened the hope that the regulator will cut monetary stimuli shortly. The PMIs released yesterday indicate an increase, and unemployment has been steadily remaining at 9.1%. Today, the eurozone also published its PPI, and tomorrow a report on retail sales and a set of services PMI are expected to be released.
The dollar/yen hit the target at 113.00, but it did not reach the high at 113.25. Meanwhile, the yen gained another bearish factor, apart from a global increase in yield, which is the upcoming elections in October and political uncertainty that may be associated with them. Abe has built up a risky game, which not only his career but also Japan's further both external and economic policy will depend on. For investors, such political shocks are always stressful and are a reason to stay away from the country's assets until the situation is clear. On the whole, in the light of all this an increase in the currency pair may strengthen further on.
The USD/RUB currency pair keeps trading in the local uptrend, which was formed in September. Within this uptrend, prices have the potential to go up towards the target range of 58.50-58.70.
The major fundamental factors determining this week's dynamics of the Russian currency will be at least three factors. Naturally, these include tendencies in the oil market. Brent oil has the potential to decrease within the correction of the previous growth wave with a target at $55.4-$54.5 per barrel. Furthermore, the situation in the primary and secondary debt markets is not in the ruble's favour. The RGBI is below 140 and continues decreasing.
Additionally, the last federal debt bonds (OFZ) auction held by the Ministry of Finance was rather poor in terms of demand. The Ministry could not fulfill the whole volume it had issued. Further, another float of debt bonds will take place on Wednesday. It will be closely monitored by investors.
The third major factor will be Russia's inflation data scheduled to be released on Friday. Taking into account this fact, the Central Bank of Russia has completely switched to its inflation targeting policy framework; investors have been monitoring statistical data on the Russian market even more closely. It is likely that the CPI will rise from the current 3.3%, still within the target level. In autumn inflation, traditionally, starts increasing. Its growth may negatively affect the USD/RUB rate.
Ivan Kapustyanskiy, equity analyst at Forex Optimum