RUB: increased political uncertainty
On Friday, RUB reacted positively to the press-conference of Viktor Yanukovich: at the end of the day, RUB had firmed near 0.4% against BASKET (42.00) and almost 0.7% vs. USD (35.86). However, escalation of Russia-Ukraine tensions over the weekend makes Friday's price action largely irrelevant. The safety bid of households for hard currency has markedly mounted up over the weekend, which is likely to hit the market this morning. Given that RUB has lately been underperforming EM FX on the back of Ukraine's political crisis concerns, we believe that to some extent the worst scenario is already reflected in the exchange rate, but nevertheless we believe that market participants are likely to be pricing in an additional premium for the increased political uncertainty this week.
Maxim Korovin, Anton Nikitin
VTB Capital analyst
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