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RUB: feeling heavy

Yesterday, RUB erased Friday’s gains, with BASKET closing at 46.11 and USDRUB surging to 40.96. Briefly, USDRUB traded near 41.40, meaning that by the close, RUB had weakened near 0.8% vs. USD, but the upper end of the BASKET’s range had remained untouched. Exporters increased hard currency selling yesterday, but the bid was strong. Meanwhile, the rest of EM FX continued on a firmer footing in general. Specifically, ZAR strengthened near 0.6% against USD, as did Asian currencies in general, while TRY and MXN closed nearly flat. Meanwhile, crude oil slipped a touch, with the price of Brent settling at USD 84.3/bbl, down from the USD 85/bbl level last week. In the immediate future, we believe that RUB might remain under pressure, so the CBR’s offer could be triggered again; however, the USDRUB rally has clearly stalled for now, as it has failed to break the 41.10-41.15 range for three consecutive sessions. Meanwhile, heavy oil-related taxes and the CBR’s FX repo auctions are to come in the next week. Further, the CBR monetary policy meeting is scheduled for 31 October, which could deliver steps aimed at addressing the increased FX market volatility. It is therefore our view that selling spikes here looks appropriate, with a 41.20 being a good target for USDRUB. That said, the market is still buying the dips.
Maxim Korovin, Tatyana Zueva
VTB Capital analyst

ruble, basket

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