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RUB: holding ground


Yesterday, RUB bounced up 1.2% against USD to 61.69. In the morning, USDRUB spiked to 63.0 amid decent trading flow as Brent continued slipping lower. However, that proved to be a strong resistance level. We noted some selling from export at these levels, yet more important was the profit-taking flow on short RUB positions, which were likely accumulated before. Later, crude oil started recovering, which provided certain support to RUB bulls. At the end of the day, Brent closed 2.3% in the black at USD 57.2/bbl (Brent).

Meanwhile, NOK ended 1.5% lower despite oil’s bounce, while the EM FX index closed just 0.2-0.4% higher. Globally, the strength of USD continues to weigh on EM equity, FX markets and commodity prices. USD is supported by the divergence in the US/rest of the world monetary policies. EUR has been especially weak as the ECB embarks on its QE programme this week. The spread between US and German 10-year bond yields is at a record high.

Overall, RUB is trading in line with our expectations in the range of 60-63 to the USD, which we find fundamentally justified at the current crude oil price levels. However, the spread between overnight FX swap and RUONIA turned negative (-29bp) on Tuesday, which might highlight some pressing issues with USD liquidity as foreign debt redemptions proceed. However, so far the said spread is far from alarming levels. Meanwhile, the Treasury announced a USD 0.5bn deposit auction for 16 March, which is likely to improve the balance with USD in the interbank market.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts


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