The old joke is that emerging markets don’t float, they sink. That’s the case for the rouble which has fallen to the base of its trading band less than two weeks after the Russian central bank allowed a large devaluation. If the Russians allow the Rouble to “float”, one measure of support for the dollar would be removed. Russia would not be obliged to sell EUR/USD to adjust its reserve basket any longer.Floating the currency would allow Russia to husband its dwindling foreign reserves.
This week, the focus is on the base of a 1.27/1.37 DNT which expires on Friday. We have an ECB meeting and a US employment report to navigate before it expires.
