Geopolitics has been a headwind for the Russian rouble – especially over the last month. Economists at Danske Bank expect the USD/RUB to surge above the 85.00 level in a full war scenario in Ukraine.

Mild escalation to take USD/RUB to the 77-80 area

“On net, the tail risks for RUB weakening (war in Ukraine) are substantial but have not been realized. In a worst-case full war scenario, we see USD/RUB moving above 85.00 whereas a mild escalation would take spot to 77-80-area.”

“Expect spot to remain volatile and gab risk is present.”

“We keep our RUB-positive forecast, which is also supported by our continued expectation to politicians finding a compromise vis-à-vis Ukraine.”

“An abrupt repricing of the risk premium in RUB on the back of a deterioration in the geopolitical situation, and/or a substantial global dollar strength are likely risks – and these should not be neglected.”