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RUB: CBR in the market

Yesterday, the Russian FX market opened in the red with USDRUB quickly spiking to 54.85-54.90. However, around noon the CBR reportedly intervened for a second time in the week, pushing USDRUB as low as 52.50-52.80. We understand that the CBR has a trailing offer selling FX in portions at the market’s price. Hence, the regulator does not defend any particular level in USDRUB, but rather is providing liquidity to the market. However, compared with previous rule-based FX interventions, the present approach is more advanced, since it does not produce negative expectations in the market. Meanwhile, yesterday’s CBR statistics showed that on Monday it sold USD 700mn (less than we estimated). At the end of the day, RUB closed at 53.18 against USD (+0.8%). Yet, Brent slipped 1.3% to USD 69.7/bbl, but we think that at current levels RUB is paying little attention to the swings in the oil market. We think the mismatch between the marginal cost of USD liquidity and RUB liquidity in the local market is the key driver in the FX spot market. Until that issue has been solved, RUB could remain vulnerable. Meanwhile, the EM FX index slipped 0.15% against USD, with ZAR and TRY trading down 0.9% and 0.4%, respectively.
Maxim Korovin, Tatiana Zueva
VTB Capital analyst

CBR, ruble

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