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RUB: down the way

 
09.10.2014

There were no surprises from RUB yesterday. Once again, it posted one of the worst daily trading results among all EM FX peers and weakened yet another 0.5% against USD (40.15) and 0.6% vs. BASKET (45.00). However, during the main Moscow exchange trading session BASKET traded as high as 44.83. Hence, the CBR sold small residuals at 44.65 and full clips at 44.70, 44.75 and 44.80. We therefore estimate the total volume of FX interventions on Wednesday at at least USD 1.0bn. Meanwhile, the EM FX index closed a tad stronger against USD, with ZAR up 0.7% and MXN strengthening 0.4%. Given that RUB lagged the market, its performance gap vs. EM FX has widened to 16% YTD, we estimate. It was near 13% at the beginning of September and around 6% in July. Hence, RUB is materially underperforming EM peers. Brent crude flirted with the USD 90.0/bbl level yesterday, which was likely one of the drivers of RUB weakness. However, as we have argued before, the deficit of US dollars is another important factor behind RUB’s weakness; market participants are just chasing the CBR’s offer in the market, since other potential sellers prefer to stay on the sidelines. Subdued turnover in the exchange market is a good illustration of the latter. Yesterday, the total trade volume equalled USD 4.8bn, which is slightly higher than Wednesday’s USD 4.5bn. However, since the beginning of October the daily turnover in the FX spot has not once exceeded USD 5.0bn. Overall, the average daily turnover in October is around USD 4.0bn, compared with USD 4.9bn in September. Hence, RUB has been falling lately on a light trade volumes.

Maxim Korovin, Tatyana Zueva
VTB Capital analyst

Tags:
ruble, basket

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