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RUB: in the red

On Friday, RUB lost near 4.4% against USD (58.28) and 5.1% vs. EUR (72.75). In the background, Brent crude oil declined simultaneously, slipping 2.7% to 61.1 USD/bbl; but RUB's price action was also an echo of Thursday’s late night crude drop. Overall, RUB weakened 9.3% WoW last week vs. USD, whilst Brent was down 10.5% WoW. Meanwhile, NOK remained under pressure having closed down 0.8% against USD on Friday. Nevertheless, the Norwegian central bank cut the policy rate 25bp on Thursday, which fuelled some pressure on NOK separately from the crude performance. The EM FX index closed barely changed at the end of the week, while ZAR was actually firmer, by 0.4%, which was offset by 0.9% TRY weakness. This morning, Brent bounced up near 1.0-1.5% amid news of Libya supply disruptions, which could provide some marginal support for RUB. However, lately the Russian FX market has reacted dully to episodes of crude strength. Meanwhile, the tax period kicks off today in Russia with the payment of obligatory social and medical transfers to the budget; VAT is scheduled for 22 December and MET for 25 December. In addition, the Treasury is set to withdraw near RUB 400bn from banks' deposits this week, while the CBR has extended the USD 2.0bn limit on rouble provision FX swap operations until 21 December. Therefore, rouble liquidity might become tense this week, which could offer some support to the FX market. Finally, the CBR is to conduct a 12-month FX repo auction today. Unlike in November, there are not set to be any technical issues using Eurobonds as a matter of collateral, and so we expect higher interest. We think decent demand at the FX auction might also underpin some recovery in RUB as well.
Maxim Korovin, Tatyana Zueva
VTB Capital analyst


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