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R-Squared investment firm ups position in Russian ruble

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February 15
7:43 PM 2016

R-Square Macro Management has increased its exposure to Russian currency Ruble. Several major asset managers lowered their wagers on Ruble amid huge volatility in the Russian currency. Ruble fell 37 percent from its high recorded in 2015.

R-Square Macro Management, an Alabama startup investment firm, hopes to take advantage of present situation in the foreign exchange (forex) market by investing in Ruble. Some global asset managers right from New York to Paris have been scaling back the bettings on Russian currency as it's undergoing wild fluctuations. 

Bloomberg reports that R-Squared recently offloaded in Russian local currency bonds as it suffered the most. It was one of best performers in developing nations, but later slipped to near to the worst situation. R-Squared Macro Management has increased its position in Ruble to the equivalent of overweight from underweight. After dropping 37 percent, Ruble is expected to make a rebound anytime.

The volatility of Rupee and Renminbi was below 10 percent as against the nearby 30 percent of Russian's Ruble. The Colombian Peso, Real and Rand were hovering at 20 percent volatility in the forex markets. Foreign investors offloading aggressively as they consider the risk at very high rate. Considering the current levels, Russian Ruble seems to be attractive, while investors don't have many potential options to park their funds. 

The bargain hunt is poised to take off as soon as risk sentiment stabilizes. The drop in oil prices and Western sanctions on Russia over its Ukraine conflict have been taking a toll on its economy. As a result, capital outflow increased. Ruble fell 5.5 percent against the US dollar this year so far. It dropped 20 percent in 2015. The three-week implied volatility rose to 28 percent, highest among all the global currencies, according to Yahoo Finance.

Chief Investment Officer Ankur Patel said: "Ruble is expected to rebound against the US dollar to 70 this year. You saw foreign investors unload the ruble at a very fast pace as they thought the risk was too high. The Russian currency has a good value to offer, and now that investors don't have too many attractive markets to invest in, they will go back bargain hunting once risk sentiment stabilizes."

R-Squared Macro Management in its latest outlook for Russia indicated that despite the bearish outlook for growth, Russian inflation necessitates stringent measures on monetary policy. The Bank of Russia may go for interest rate hike. Last year, the Russian central bank slashed interest rate from 17 percent to 11 percent. 

Ruble is trading at 80 against the US dollar. Investment analysts feel that the drop in Ruble is now excessive and it's poised for a recovery any moment. When concerns about global economy growth ease, then Ruble will start to regain its strength. Until this, investors need to wait for value.

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