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RUB: approaching a fair level

Yesterday, RUB recorded yet another decent session. By the end of the day, it had gained 7.1% against USD (55.65), and USDRUB even briefly traded below 55.0. However, trading flow was rather thin, with total turnover in the MICEX of just USD 4.0bn. In our view, this highlights that neither export selling nor retail purchasing flows were strong yesterday. Interestingly, RUB firmed despite the slump in crude oil: in the morning, Brent traded almost 2.0% in the black, but ended down 3.6% at USD 59.05/bbl. In light of this, NGN lost 3.0%, while NOK slipped 0.8%. The EM FX index closed nearly flat against USD: LatAm currencies saw pressure, which was offset by stronger Asian FX. At Urals of USD 55/bbl and assuming a 6.5% C/A surplus, we estimate the fair USDRUB rate near 55.0. Hence, we think that RUB is close to its fair levels now, but do not rule out some further strengthening on the back of tax payments. However, for now we close the short USDRUB trade call we recommended last week. We think it makes sense to take some profits here as 55.0 for USDRUB might prove a nice resistance level, in our view. In addition, the basis has become rather negative once again, while the overnight FX swap spread to RUONIA is making an all-time low. Yesterday, banks secured USD 3.9bn at the one-month FX repo auction, at an average rate of 1.4351%, while the take-out at the 12-month FX repo auction was only USD 43.2mn. However, so far this does not help to sustain the balance between the marginal cost of USD and RUB liquidity.
Maxim Korovin, Tatiana Zueva
VTB Capital analyst


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