Yesterday, total trading flow in USDRUB on the MICEX was reported at just USD 2.6bn, which is rather low even in light of the general decline in market liquidity over the last 12 months. At the end of the day, RUB lost 1.3% against USD and closed at 62.54. The Brent crude oil spot price was down 1.5%, but nearest futures (CO1) declined 4.9% to 59.5. Hence, crude’s erratic performance paved the way for some further RUB correction, while NOK closed 0.4% in the red. The EM FX index declined 0.5-0.8% against USD with ZAR down 1.0%. Overall, we do not think it is worth trying to read too much into the Russian FX market’s performance yesterday. Apparently, the offer in USDRUB subsided as the tax period ended, but market participants are unwilling to build a substantial long position in USDRUB as oil prices remain supportive for RUB’s near-term outlook.
Separately, we highlight that the CBR’s FX repo auction saw relatively modest demand yesterday. In particular, banks borrowed USD 986bn for 12 months at an average rate of 1.21% and USD 600mn for 28 days at 0.72%, while the combined offering volume was USD 4.0bn. Today, the CBR is conducting a one-week FX repo auction: USD 1.6bn needs to be rolled over from the previous week. However, even if banks secure nothing from the regulator, the total amount of US dollar debt to the CBR would only decline USD 253mn to USD 30.5bn, which is still high by historical means.