Yesterday, RUB opened a tad stronger with USDRUB touching 61.90. However, oil prices dynamics later turned negative, which undermined risk sentiment in the Russian exchange market. USDRUB gradually started surging up and in the evening, when Brent dropped to USD 51.2/bbl, it spiked to 62.6 highs. The strength of the US dollar continued to weigh on EM equity markets and commodity prices. The US dollar is supported by the divergence in monetary policy between the US and the rest of the world. However, in the end yesterday, global risk sentiment was buoyed by growth-supportive comments from Chinese Prime Minister, Li Kequiang. Mario Draghi, the ECB President, added to the positive sentiment in a speech last night by claiming that the Eurozone was on the road to a sustained economic recovery.
Hence, Brent settled only 2.3% in the red at USD 52.6/bbl, while RUB closed flat against USD at 62.20. Meanwhile, NOK declined 0.7%, while EM FX index gained 0.3-0.5%, with ZAR and TRY advancing 0.7% and 0.5%, respectively. Trading flows in the Russian FX market were relatively light yesterday: MICEX reported total turnover in USDRUB of USD 4.2bn. Exporters continued selling hard currency ahead of the taxes, which provided some support to RUB in a situation of moderate liquidity.
Yesterday, the CBR held two FX repo auctions, providing USD 2.6bn to banks in the 28-day week repo at an average rate of 0.68% and USD 1.0bn in one-year tenor at an average of 1.22%. Today, the CBR is to conduct a one-week FX repo auction, and we expect good demand, given that banks need to return USD 6.8bn to the regulator on Wednesday. In addition, yesterday the CBR announced two FX 312-P auctions for Friday 20 March. The total amount on offer is USD 3.0bn; the regulator is going to provide funds for 28 days and one year. In the meantime, the Ministry of Finance’s FX deposit auction found little interest yesterday: on the USD 500mn offering size only one bid for USD 27mn was placed. It was fulfilled at 1.20%; the deposit matures in 29 days.