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RUB: tax support?

Yesterday, RUB started trading firmly right at the beginning of the day. In the end, it gained 1.0% against USD (46.29) and 1.2% vs. EUR (57.97). To some extent, RUB’s performance was part of the general recovery in the EM FX space: on average, EM currencies strengthened 0.3% against USD. Meanwhile, ZAR traded up 0.9%, while TRY gained 0.5%. In addition, NOK closed 0.5% in the black, amid the bounce in Brent from the day lows of USD 77.60 to USD 79.55/bbl at the end. Finally, it is the middle of the tax period (in particular, VAT was due yesterday). In light of this, tensions on the money market increased, with overnight rates sharply
up. Given that the CBR’s limit on FX swap operations is intact (to recap, it is USD 2.0bn), some market participants might have decided to cut their FX positions to a certain extent, since next week promises no relief liquidity-wise (MET and corporate profit tax are due). In addition, perhaps, expectations of higher selling from exporters might have helped RUB’s performance as well, but trading volumes remained subdued (MICEX’s turnover was USD 3.9bn). Hence, there is no indication of an export presence in the market so far. Interestingly, the RUB/USD basis swap has widened into substantially more negative territory during the last couple of days. Now, it stands at -250bp, which is not an encouraging sign for the FX spot market.
Maxim Korovin, Tatiana Zueva
VTB Capital analysts

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