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RUB: strike back


Yesterday’s session in the Russian FX market will be remembered for a long time. In the morning, everything followed the normal course: RUB opened markedly weaker, with USDRUB touching 43.50, while the CBR made near USD 2.0bn in selling FX interventions, moving the upper end of the BASKET band to 48.50. However, sentiment later turned the corner, and RUB started moving fast. By the end of the day, RUB had appreciated near 3.3% against USD (41.50) and near 3.8% vs. BASKET (46.39). Trading activity was huge, with total turnover of USD 11.6bn registered on the MICEX- twice the daily average. We do not know the trigger for this move. We saw no specific piece of news to ignite such frantic price action; however, as we have argued recently, there are a number of reasons for RUB to appreciate. First, the pickup in crude oil prices; second, the visible and (in our view) unjustified underperformance vs. other EM FX; third, record high YTD net short positioning according to CFTC data; fourth, an increased RUB carry (the highest among liquid EM peers), and finally, higher hard currency selling volumes from exporters. We are therefore sticking with our short USDRUB trade for now. Overall, yesterday’s price action looks like profit taking on large short RUB positions ahead of today’s CBR’s meeting. Today, we believe that morning trading could be choppy, as market is likely to be nervous about the CBR’s decision (publication of the press-release is for about 13:30 Moscow time or 10:30 GMT).

Maxim Korovin, Tatyana Zueva
VTB Capital analyst

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