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RUB: hit as hard the rest

On Friday, RUB ended about 0.8% weaker against USD at 39.94. Thus, USDRUB is just a tad below the psychologically important level of 40.0, which might ignite FX concerns among households. However, this view is just general thinking without any pros or cons to either back-up the theory or negate it. Previously, 36.0 for USDRUB was also widely seen as an 'important' resistance threshold, above which households would start a wide conversion of rouble deposits. Meanwhile, BASKET closed at 44.45 on Friday suggesting that the CBR might have sold near USD 700mn in FX interventions. In our view, RUB's sluggish performance on Friday was driven by economic factors rather than politics. Hence, Brent trading at USD 91.0/bbl has clearly weighed on Russian FX. However, US jobs data has produced a decisive hit on the entire EM FX. US nonfarm payrolls showed a solid picture with jobs up 248k in September and the unemployment rate dipping to 5.9%. In light of this, the EM index closed about 0.5% weaker against the US dollar. However, apart from the strong BRL rebound (surged 1.5% on Friday driven by presidential election newsflow), the broader picture was even bleaker than for RUB. For example, ZAR and TRY dropped near 1.3-1.4%, while MXN and ILS performed in line with the Russian currency (i.e. down near 0.8%). Commodity-based currencies also slipped, with NOK down 1.2% and NZD lost almost 2.0%. The main question for the Russian market now is: when (and if) is the regulator going to give a bold response to the FX volatility?
Tatyana Zueva, Maxim Korovin
VTB Capital analyst

ruble, basket

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