(Bloomberg) -- As regulators in Turkey and Russia meet this week to decide on interest rates, currency traders are eyeing one with disdain and the other with approval.
The policies of Bank of Russia chief Elvira Nabiullina are persuading investors it’s a good time to buy the ruble and sell the lira, a trade that’s earned an 8 percent return in the past three months. Strategists at UniCredit SpA are recommending the wager because Turkey is expected to keep rates on hold, curbing inflows, while a probable Russian cut will do little to dent ruble demand.
Nabiullina’s slow-and-steady approach to monetary easing is credited with helping ease Russia’s economy out of financial crisis. Her cautious approach has curbed inflation to a record 3 percent, keeping real interest rates among the highest in emerging markets even after 150 basis points of reductions this year.
“We once again choose to short the lira against the Russian ruble given healthier external balances and high real yields,” said Kiran Kowshik, a currency strategist at UniCredit in London.
In Turkey, by contrast, Turkish central bank Governor Murat Cetinkaya is struggling to tame inflation as the country’s government supports the economy with fiscal stimulus. Investors have also been selling bonds amid an ongoing diplomatic spat with the U.S.