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RUB: in a whirl

Yesterday’s session was quite volatile and eventful, yet trading flows in the MICEX still look subdued: total turnover in USDRUB was only USD 3.9bn. Crude oil saw nice swings, with Brent spiking above USD 50/bbl briefly in the middle of the day, only to close 2.7% in the red at USD 46.3/bbl. In addition, the Swiss National Bank (SNB) unexpectedly abandoned the EURCHF floor at 1.2000. The SNB has intervened at great cost to protect that floor with the result that the central bank’s balance sheet is now in excess of 80% of GDP. In spite of negative interest rates (now minus 75bp after yesterday’s move), the SNB found it difficult to deter risk-averse capital inflows and the open-ended bid in EUR has now gone. This is positive for USD and the gold price. In light of this, the EM FX index slipped 1.0%, with losses being broad-based. Hence, RUB’s weakening of 0.8% against USD to 65.15 does not look surprising, even though USDRUB flirted with 64.00 during the session. On the other hand, NOK closed 0.6% in the black and other commodity-based currencies like AUD and NZD gained 0.9% and 1.4%, respectively. We continue to think that if crude oil stabilises, RUB has room to appreciate and outperform of other EM peers. However, yesterday’s price action in the oil market (i.e. a strong intraday correction from the session highs below the previous day’s closing level) illustrated that current levels might be vulnerable, in our view.
Maxim Korovin, Tatiana Zueva
VTB Capital analyst

ruble, oil

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