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RUB: regaining ground


Friday's session in the Russian exchange market was spectacular. In the morning, trading patterns were not much different to the preceding days: USDRUB attempted unsuccessfully to break the 64.75 resistance level, backed by strengthening crude oil. However, in the evening, the bid faded away, and so RUB started to rapidly appreciate against USD. Trading flows increased with MICEX recording a total turnover of USD 4.2bn in USDRUB. In the end, RUB firmed 3.1% vs. USD to 63.44, whilst Brent gained 4.2% having closed at USD 59.4 /bbl. RUB outperformed other commodity-linked and EM currencies: NOK and NGN firmed only 0.7% and 0.9%, respectively, while the EM FX index closed just 0.1-0.2% in the black vs. USD, with ZAR and TRY up near 0.4%, countered by the 0.4% slippage of BRL. Today, the US markets are closed for President's Day, so price action is likely to be slow. We continue to stick with our view expressed last Monday that USDRUB has more room to go lower (our short-term target range is 60-63) supported by the high recovery and stabilisation of crude oil prices. In addition, on Friday the CBR announced two 312-P FX refinancing auctions for a total amount of USD 5.0bn. This is above the two regular FX repo auctions. On Friday (20 February) the regulator is offering USD 4.0bn for 28 days and USD 1.0bn for one-year. It would only partially be a roll-over of the previous auctions (USD 620mn is due on 25 February). Last week, the negative spread between the overnight FX swap and RUONIA started widening visibly and approached the alarming level of -100bp, which could had have some negative spill-over into the FX spot. Hence, the CBR's quick reaction to these developments is a positive sign, in our view. Finally, we highlight that the Russian 5-year CDS spread advocates technically for a stronger RUB as well.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts

ruble, oil

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