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RUB: narrowing the gap with EM FX

Yesterday, RUB had quite an active session in terms of the price action, while total turnover in the MICEX was USD 4.2bn. In the morning, RUB kicked off on a stronger footing, with USDRUB touching lows of 53.30. However, it later picked up to the 54.50-55.00 range and briefly spiked to 56.00. Nevertheless, in the end RUB settled at 54.71 against USD, i.e. 1.7% in the black. The bounce of Brent crude oil prices helped RUB’s gains as the former closed up 1.0% at USD 59.67/bbl, while futures surged 2.6% to USD 61.69/bbl. Meanwhile, the EM FX index weakened 0.7% against USD, with ZAR and MXN down 0.7%, while BRL lost 1.1%. There was a solid 3Q14 US GDP revision, up to 5.0% from 3.9%, according to the ‘third’ estimates released by BEA. In particular, the PCE estimate was hiked to 3.2%, from 2.2%. Statistics underpinned stronger DXY, which hit 90.00 for the first time since 2006, and the UST 10Y yield widened 10bp to 2.26%. Subsequently, EM FX came under pressure. 

Therefore, RUB’s performance gap with the EM FX index declined to 34% YTD, from the 47% seen in the mid-December. Separately, we highlight that the CBR conducted two FX repo auctions yesterday: at the 12-month auction, demand was USD 43.2mn, while in the 21-day one it was USD 209.7mn. All bids were fulfilled.
Maxim Korovin, Tatiana Zueva
VTB Capital analyst


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