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RUB: unnecessary swings


Yesterday, RUB lost 0.2% to USD and closed a tad stronger vs. BASKET (44.21) thanks to the weak euro. However, the session itself was not an easy walk. In the morning, RUB opened unchanged and firmed a bit towards the middle of the day, with BASKET fluctuating near 44.10. Later, Bloomberg (citing two unnamed sources in the CBR) reported that the regulator was weighing capital controls to fight the outflows. In a second, BASKET spiked 30 kopeks up and hit the CBR’s offer at 44.40. Hence, for the first time since May, the CBR was selling FX in the market. RUB’s weakening proved to be short-lived, as the regulator denied the rumours saying that it was not considering limitations on international capital flow. Therefore, the spike in FX volatility ignited by the initial piece of news was completely unnecessary, while the magnitude of the price action highlights the vulnerability of the exchange market. In addition, we noted that the spread between deliverable and non-deliverable FX forwards widened after the headlines on capital controls hit the wires; in particular, for one month this basis closed at around 1.75%.

Maxim Korovin, Tatyana Zueva
VTB Capital analyst

ruble, basket

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