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RUB: scary oil

 
03.10.2014
Yesterday, liquidity in the Russian exchange market remained low – total daily turnover was just USD 3.01bn. Meanwhile, RUB firmed slightly against USD (39.65, +0.12%) and closed almost flat vs. BASKET (44.34). During the day, USDRUB traded in a fairly tight range of 39.50-39.65. Interestingly, RUB paid little attention to the continuing slide in crude oil; in particular, Brent lost near 1.5% and closed at USD 92.1/bbl yesterday. In light of this, NOK surrendered near 0.2% to USD. However, RUB enjoyed some support from the generally strengthened momentum in the EM FX space: on average, the index gained 0.3-0.4% against USD. In particular, ZAR, TRY and MXN closed 0.5-0.6% stronger. RUB’s resilience to the poor crude oil performance could be fundamental and technical in nature. Regarding the latter, we highlight that the short RUB trade has clearly been overcrowded recently, and subdued trading volumes indicate that the potential incremental bid for USDRUB is perhaps exhausted. On the fundamental side, it might well be the case that RUB weakening in August-September spooked imports considerably, so the C/A adjustment is happening faster than oil is sliding. Nevertheless, calling for short USDRUB trade still looks risky given crude dynamics (technically, Brent might break below the USD 90/bbl level). On the other hand, the announcement of FX swap operations by the CBR (see below) might offer support to RUB. However, the exchange market is apparently not ready to trade on expectations. Therefore, we also prefer to wait for the regulator to take action.
Maxim Korovin, Tatyana Zueva
VTB Capital analyst

Tags:
ruble

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