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RUB regains ground

Yesterday’s session was strong for RUB, although EM FX in general treaded water. At the end of the day, RUB firmed 0.4% against both USD (34.91) and BASKET (40.44); however, during the day RUB touched 34.67 and 40.18, respectively. Thus, for most of trading RUB traded in the USD 200mn intervention zone, meaning the CBR’s drag on liquidity has finally eased for now. Meanwhile, we highlight that RUB outperformed by 0.3-0.4% the average EM FX index, which closed barely changed against USD: RUB was the best performing EM currency yesterday. So, what next? We keep our view that the ‘fair’ level for RUB at the end of 1Q14 is 33.50-34.00, so there is some room left for further appreciation – especially, given that RUB still looks 2.5-3.0% undervalued relative to EM FX peers YTD. At the same time, we are maintaining our forecast of 35.00 for USDRUB by the end of the year. Yesterday, we noted that exporters have finally started selling hard currency, and that flow is likely to intensify closer to the beginning of the tax period.
Maxim Korovin, Antin Nikitin
VTB Capital analyst

FX market, ruble

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