The US dollar, which on Wednesday among the Big Ten fell only against the commodity group (NZD +0.24%, NOK +0.20% and AUD +0.14%), on Thursday afternoon rose against all G10 currencies, with the exception of the Australian competitor. Here, the AUD reacted to information published by the Australian Bureau of Statistics, according to which iron ore exports increased in December by 21.1% compared to November, and coal-by 26% m/m.
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The dollar index continues to move towards the target set by us at the level of 92 p. as part of an upward correction.
In the short term, the dollar may continue to grow, as the positioning remains too skewed in favor of short positions on the US currency. At the same time, global stock markets seem to have stalled somewhat, lacking growth drivers, and recent US economic data has been surprisingly strong, raising questions about the feasibility of Biden's proposed massive $ 1.9 trillion stimulus.
But the current trend towards the strengthening of the US currency, in our opinion, is untenable neither in the medium nor in the long term. The US Federal Reserve will be patient with inflation, and rates will remain at near zero for quite some time. Real yields in the US, whether nominal Treasury yields (decadal 1.129%) net of inflation (1.4% yoy) or net of inflation expectations (2.2% at the end of 2021), continue to decline, indicating that the dollar's rise from the beginning of the year will not last long.
In the post-coronavirus period, it will also be important which countries will be able to carry out nationwide vaccination faster than others. The thesis that nationwide vaccination reflects the victory over the pandemic, and, consequently, allows the country's economy to begin to recover faster, and the currency of this country to strengthen-is true in many cases. But for the dollar, this may be an exception, since the United States, in one team with China, is the locomotive of the global economy.
Rapid vaccination in the US is a strong driver of global economic growth and global demand, as well as the reason for the decline in demand for protective assets, which also traditionally supports the US currency. From this point of view, the currencies of the commodity block look very preferable. The Norwegian krona, as well as the Australian, New Zealand and Canadian dollars, will benefit from high vaccination rates in the US and other key commodity consumers.
Brent crude oil prices rose above $ 59 per barrel for the first time since February 21, 2020, fully recouping the drawdown of the coronavirus. This supported the ruble. The higher the confidence of market participants that new sanctions will be applied against the Russian Federation, the lower the geopolitical premium in the ruble, since the market relies on personalized restrictions on individual officials, possibly businessmen, and not on broad economic sanctions that could affect entire industries, such as the banking sector.
Against the background of a positive assessment of the main currencies linked to commodity assets, we continue to look constructively at the strengthening of the ruble in the medium term. We have repeatedly noted that the premium for geopolitical risk in the ruble looks inappropriate in such a size as it is now, while the market practically does not take into account the Russian national vaccination as a driver that puts the Russian Federation one step ahead of its "classmates" in the EM segment — South Africa, Brazil, Mexico.
The USDRUB is currently in the too high medium-term range of 75.00-80.00, and we see reasons to return to the fairer medium-term range of 75.00-70.00, with a shift to the middle of this corridor.
