A decline in oil prices and souring risk sentiment withdrew support from the Russian currency in the first quarter, currency strategists Vladimir Kolychev and Guillaume Salomon wrote in a market note.
The ruble was further hit earlier this month by an announcement that the Finance Ministry would start to buy foreign exchange for the Sovereign Funds directly in the markets, rather than via the central bank, as early as in the second half of this year, against expectations that this would start next year or in 2015.
"Poor communication from authorities (no technical details) along with a further softening in global risk environment have brought about a massive sell-off which quickly pushed the [euro/dollar] basket into the first CBR [Central Bank of Russia] intervention band," the strategists said.
At the beginning of this year, another Societe Generale strategist predicted that the Russian currency would be a "star performer" due to an anticipated strong improvement in the global risk backdrop, a strengthening in the Russian policy framework and the impact of the liberalization of the local bond market, the OFZ, with Russian bonds now being traded on Euroclear.
But now, strategists at Societe Generale expect monetary easing via the reform of the refinancing system and also through 50 basis points of rate cuts this year, so they have a cautious stance on the currency.
"Given our expectations for a prolonged period of slower (than pre-crisis) global growth and flat oil prices, our equilibrium models point to limited upside for the RUB in the medium term," they wrote.
"Further appreciation in real terms may escalate competitiveness issues."
They said they were selling the RUB against its euro/dollar basket.
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