Yesterday, RUB rallied decently having firmed near 2.2% against USD to 55.46, albeit on the back of a tiny trading flow: total MICEX turnover in USDRUB was only USD 2.3bn. Subdued trading activity does not come as a surprise given the Easter holidays. Brent also showed a decent performance, hiking 5.2% to USD 57.1/bbl. The uptick in oil prices definitely provided support to the Russian FX market, although we think that the main reason behind RUB’s recent strong performance was the covering of USDRUB longs that were opened a couple of weeks ago by international investors. As we have argued before, moderated corporate de-leveraging and FX conversion by the population, combined with the effective functioning of the CBR’s instruments of FX liquidity provision, paved the way for RUB to scratch the 55.0 level.
The EM universe had a slow session, with the EM FX index on average weakening 0.1% against USD. Among the leaders, we highlight KRW and IDR, which advanced 0.7% and 0.5%, respectively. At the same time, MXN surrendered 0.6%, while commodity-based NZD lost 0.8%.
The CBR’s FX auctions yesterday were taken in full, registering decent demand. At the one-year auction, banks secured USD 1.0bn at an average rate of 1.85%; demand printed at USD 1.5bn. In turn, at the 28-day FX repo, the CBR provided USD 3.5bn at a 1.19% average rate amid USD 4.1bn demand. Hence, banks have refinanced USD 4.2bn of maturing FX repo funds this week, and even if today the one-week FX repo is fully ignored, banks’ debt to the regulator on FX repo operations would increase to USD 31.3bn on Wednesday.