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RUB: unloved child

Yesterday, RUB lost near 0.7% against both BASKET (39.21) and USD (33.80). The trading session resembled one-way traffic, since RUB was depreciating almost unchecked. Meanwhile, EM FX in general held pretty well in largely hesitant and inactive trading: TRY, NOK and KRW saw the biggest pressure (except for RUB), losing 0.2-0.3% to USD, while the rest of the EM FX universe closed flat or even a little stronger. In terms of flows, both local and international market participants were selling RUB yesterday. As a result, RUB is now underperforming the average index of EM FX peers by nearly 1.5% YTD, which is rather unusual at the beginning of the year. Overall, we think RUB might rebound in the near term on the back of profit-taking since, in our view, there are no fundamental reasons for it to underperform in 1Q14 thanks to the seasonally strong C/A. Also, it is becoming clear that international short positioning in RUB is starting to look overcrowded (although usually it takes some time before the pendulum swings back in the opposite direction).
Maxim Korovin, Anton Nikitin
VTB Capital analyst


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