The milder RUB REER appreciation in February (vs. that seen in January) was partly a result of the average nominal rouble weakening against EUR and less strengthening against USD (RUB was up 0.3% MoM against USD and down 0.3% MoM against EUR, according to official average rates) and a spike in CPI (to 7.3% YoY from 7.1% YoY in January). Since January 2008, RUB REER has gained 18.5%.
Along with other EM currencies, RUB has been losing value against USD as the latter has been getting stronger against EUR. However, the first quarter is seasonally supportive for RUB and, as in 2012, this year RUB outperformed most of the other EM currencies. In the coming months, we suggest that internal factors will continue to support Russia’s national currency and RUBBASKET might slide to 34.0-34.5. However, given the stable level of the terms of trade RUB appreciation this year is unlikely to be comparable with that in 1Q12 (+4.8% QoQ).