According to the CBR, the rouble real effective exchange rate (tradeweighted and adjusted for inflation (REER)) depreciated 2.0% MoM in May following the 0.3% MoM decline in April, bringing rouble appreciation to 3.7% YTD. The rouble weakened 3.6% MoM ( in real terms) against the dollar and 1.3% MoM against the euro. This compares with 0.4% MoM and 0.2% MoM respectively in the previous month.
RUB REER depreciation in May was expected due to nominal rouble depreciation (against USD by 10.5% MoM and against EUR by 4% MoM in May, given official average rates) and low inflation (0.5% MoM in May). At the same time, the recent pace of REER weakening is not as notable as it could be due to the global scale of the ‘flight to safety’ ( ie, depreciation against USD and JPY across the board) with RUB remaining one of the strongest EM currencies since the start of 2011. Recent RUB REER depreciation is definitely not enough to have a visible impact on external trade, meaning that if an adjustment in import is needed to balance the current account (in case the oil price is below the USD95/bbl mark in 2H12) it will require significantly deeper RUB weakening.