The rouble real effective exchange rate appreciated 1.0% MoM in August, softening from a jump of 3.0% MoM in July and bringing the YTD change to +0.6% (from +0.3% in January-July). RUB strengthened against USD, growing 1.9% MoM in real terms during the last month of summer (-5.8% YTD) and 1.1% MoM against EUR (+3.1% YTD).
We had expected RUB REER appreciation in August due to the nominal rouble strengthening during the month (1.6% MoM against USD and 1.2% MoM against EUR, according to official average rates) and higher inflation than in the US and Euro area (0.1% MoM, compared with -0.2% MoM in the US and -0.5% MoM in the Euro zone). We suggest that the further acceleration in consumer prices growth (to 7.3% Dec/Dec) in Russia might help REER in 2H12 and balance further RUB weakness.
In our view, the recent rouble REER appreciation was beneficial for import growth dynamics through the influence on real wages. Shrinking CA, due to lower oil prices in the coming months, is set to limit the possibility of any further RUB appreciation in REER terms, while the CPI downwards trend will be supportive. Hence, we expect the rouble to lose value against both the dollar and the currency basket, falling to 34.40 and 37.50, respectively, by the end of the year.