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RUB: further into the red

Yesterday, despite S&P’s decision to reaffirm its sovereign rating for Russia at BBB-, relatively stable crude oil prices and generally positive EM FX performance, RUB continued to trade on a softer footing. By the end of the day, RUB had lost 1.1% against USD (42.27) and surrendered 1.3% to BASKET (47.43). Thus, during the main session, the CBR shifted the operational band five times (by 25 kopecks), implying near USD 1.75bn in FX interventions. Meanwhile, the EM FX index (excluding BRL’s poor performance due to the Brazilian presidential election) closed mostly flat yesterday. Meantime, we highlight that the CBR’s role as a liquidity provider in the FX market was significant during the last couple of sessions. We estimate that the CBR’s FX interventions accounted for 21-22% of total USDRUB T+1 trading volume (although strictly speaking, the regulator sells EURRUB as well) in October. This is comparable with the relative amount of FX interventions in March. However, we highlight one difference: in March the CBR’s participation in FX trading exceeded 20% only occasionally (during four sessions), while in October the regulator has been visibly present in the market during most trading days. Specifically, in the last couple of sessions, the CBR accounted for 30-40% of daily trading turnover. Overall, this suggests that the presence of exporters in the FX market was (and is) negligible, which has additionally weighed on RUB.
Maxim Korovin, Tatyana Zueva
VTB Capital analyst

ruble, basket

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