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RUB: can’t resist oil


Yesterday’s session kicked off on a fairly positive note, with RUB trading marginally stronger in the first half of the day in line with EM FX peers. However, the market sentiment darkened in the second part of the day, around the beginning of the US trading session: in a matter of hours, Brent declined from USD 86.80–87.00/bbl to USD 84.60–84.80/bbl. Subsequently, the pressure on RUB mounted significantly, so in the end the Russian currency lost 1.0% to USD (41.32) and 0.8% vs. BASKET (46.30). To recap, the upper end of the BASKET’s range, where the CBR starts FX interventions, is now 46.30, and it was not touched yesterday during the main MICEX trading session, which is likely to happen today. Overall, RUB performed generally in line with commodity-based currencies, as NOK also lost 0.7% to USD. At the same time, RUB’s performance gap with the EM FX index has widened as the latter closed just 0.1% lower vs. USD. Hence, we estimate RUB has weakened 18.5% YTD vs. EM FX. Meanwhile, yesterday Ksenia Yudaeva, First Deputy Chairman of the CBR, said that the regulator was going to resist the speculative and panic pressure on the FX market, which might pose a threat to financial stability. However, the main caveat is that increased crude oil volatility makes it hard to distinguish between fundamental adjustments and speculator activities. Hence, we think the CBR is to continue with its current FX intervention policy in the near term.

Maxim Korovin, Tatyana Zueva
VTB Capital analyst

ruble, oil

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