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RUB: outperforming peers

 
18.03.2015

Yesterday, the Russian FX market continued to impress, with solid resistance towards falling crude oil prices. RUB kicked off on a stronger footing and despite some intraday volatility (USDRUB touched 62.0) in the end firmed 1.3% against USD at 61.45. Meanwhile, Brent bottomed at USD 51.33/bbl, slipping another 2.3%, although the nearest futures (CO1) recovered towards the end of the session and closed flat. Trading flows moderated slightly, with MICEX reporting USDRUB turnover at USD 4.0bn. Overall, a strong local hard currency offer is the main reason behind RUB’s appreciation and general resilience to oil swings.

The EM FX index firmed 0.2-0.3% against USD. TRY and IDR were the brightest spots, rising 0.5%. Commodity-backed currencies traded heavily, with NZD down 0.8% and NOK weakening 0.5%. Yesterday, the CBR conducted a one-week FX repo auction, placing USD 2.9bn at an average rate of 0.65%. Nevertheless, today banks’ outstanding debt to the regulator on FX repo operations is to decline to USD 28.2bn (-USD 0.3bn).

Globally, the main event for today is the FOMC meeting. In spite of the recent slowdown in the US economy, which might largely reflect the impact of bad weather on activity, the FOMC is expected to amend its ‘forward guidance’ on interest rates, specifically by removing the word ‘patient’ from the official statement. This would make forward guidance more data-dependent as well as giving the FOMC greater flexibility to act on a meeting-by-meeting basis. It would leave open the possibility of a 25bp rate hike at the June meeting. If so, USD could gain another impulse for strengthening.

Maxim Korovin, Tatina Zueva
VTB Capital analysts

Tags:
ruble

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