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RUB: there and back

The Russian currency remains vulnerable to political rhetoric. Thus, in the morning, RUB opened visibly weaker given concerns about EU sanctions on Russian banks. Hence, USDRUB touched 35.15 during the first trading hours up from 34.84 on Wednesday. However, USDRUB later calmed down to 34.95 before closing near 35.00 on the back of news that Russia’s largest corporations would not be on the EU’s list. Thus, in the end, RUB lost near 0.4% against both USD and BASKET (40.43). We highlight RUB failed to secure any support from the fact that MET tax payments are due today, as perhaps exporters accumulated the necessary liquidity earlier this week. Meanwhile, the rest of the EM currencies saw some pressure as well, with the equally weighted average EM FX index down near 0.1-0.2% vs. USD. Overall this week, RUB traded in line with our expectations, i.e. consolidated in the 34.80-35.20 range, having been heavily impacted by geopolitics. We believe that RUB might get some support from the CBR if the regulator strengthens its hawkish message. Otherwise, we expect pressure on RUB to build ahead of dividend payments and in the run up to the end of the tax period. However, politics are set to remain the dominant factor for the Russian currency, so expect more volatility down the road.
Maxim Korovin, Anton Nikitin
VTB Capital analyst


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