RUB: not as bad as one might think
Yesterday morning, BASKET spiked almost to 43.00, while USDRUB broke through 36.80, but the sell-off was rather short-lived thanks to decent CBR support. During the first trading hour, we estimate the regulator sold about USD 6.0bn in interventions, but without the accompanying shift in the BASKET band. Thus, effectively the CBR showed an offer below the market’s initial bid. In total, we think the CBR conducted USD 11-13bn in FX interventions yesterday amid total turnover of USD 17.2bn in USDRUB (T+1 settlement). Needless to say, yesterday’s trading flow was an all-time high. At the end of the day, we think the regulator shifted the top end of BASKET’s band to 42.75. Late Moscow time, the CBR announced extraordinary changes to its FX policy: until further notice, the regulator is to set the level of accumulated interventions on a daily basis in accordance with the situation on the market. Thus, yesterday the CBR shifted the BASKET’s band when the volume of accumulated interventions reached USD 1.5bn. It is clear that the currency is becoming a binding constraint for policy and the regulator is likely to prefer defending RUB in case of continued pressure. Once the dust settles, however, we would expect the currency regime to become even more (not less) flexible. At the end of the day RUB surrendered near 1.8% to BASKET (42.77) and 1.9% to USD (36.56). The rest of the EM FX spectrum was also under pressure, but slipped just 0.3% on average.
Maxim Korovin, Anton Nikitin
VTB Capital analyst
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