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RUB: subdued trading activity


Yesterday, trading activity in Russia was low, with the MICEX recording a total turnover just shy of USD 3.5bn. Given that this is a week in which companies start paying heavy taxes, the liquidity of the FX market leaves much to be desired. In these circumstances, trading was erratic yesterday: in the morning, USDRUB touched 47.50 then slid down to 47.05 after midday. For most of the session, USDRUB traded in the 47.20–47.40 range. At the end of the day, RUB settled at 47.20 against USD, i.e. almost flat to Friday. Meanwhile, the rest of the EM FX space traded on a softer footing, with ZAR and MXN down some 0.4%, while on average EM FX weakened 0.2–0.3% against USD. NOK also closed in the red vs. USD (-0.5%). The CBR’s 12-month FX repo auction predictably saw sluggish demand with total bids amounting to USD 87.7mn amid a USD 10bn offer. All bids were fulfilled at an average rate of 2.14%. Separately, banks secured USD 312.4mn at the 28-day FX repo auction at a rate of 1.65%. The Treasury’s FX deposit auction was more successful: banks borrowed USD 2.13bn out of USD 3.0bn offered, at a 1.71% rate for 28 days. Thus, it looks as though pricing is not a constraint for banks, but rather the FX repo structure has some drawbacks. Perhaps banks do not want to lock relatively scarce collateral for FX repo operations because it might be needed for rouble liquidity as the Treasury starts withdrawing deposits to fund the budget’s outlays. The latter could produce some temporary liquidity squeezes. Meanwhile, the CBR’s limit on FX swaps means that a reliable way to cover marginal liquidity needs would be the overnight repo window.

Maxim Korovin, Tatyana Zueva
VTB Capital analyst

ruble, FX market

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