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. Last Updated: 07/27/2016

Ruble Carves Out Place in FX Industry

LONDON -- The ruble, which became convertible last summer, is carving out a place in the foreign exchange industry as investors are attracted by local bonds and equities and prospects for steady currency appreciation.

Last month, spot FX broking platform EBS launched electronic trading in dollar/ruble; Saxo Bank made the pair available to smaller investors on its retail platform; and Euroclear, which clears non-FX transactions, started accepting the ruble as a settlement currency.

The ruble's relative stability has come to the fore as a rise in risk aversion has prompted a sharp sell-off in emerging markets, sending the U.S. dollar nearly 5 percent higher versus the South African rand and nearly 4 percent up against the Turkish lira last week. The ruble held firm, even ending last week with a slight gain versus the greenback.

Merrill Lynch chose selling the dollar versus the ruble as one of its top trades for this year, estimating that the ruble is 66 percent undervalued on a real basis with a fair value of 15 per dollar compared to current levels around 26.24.

"Inflation and money growth continue to be a source of concern for us and we believe that the ruble is the most effective tool available to the central bank to tighten monetary policy," Merrill analysts said in a research note.

The latest Reuters poll shows the ruble firming to 25.78 per dollar by the end of the year, but making only very modest gains versus the euro to 34.30.