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RUB: correction; another rate hike on CBR FX repo


On Friday, trading activity increased, with the MICEX reporting USD 7.1bn in turnover. We think the retail selling flow in the morning was the main catalyst of USDRUB’s sharp dip to 50.40. However later, risk sentiment reversed: in particular, the CBR's decision to hike rates on FX repo triggered some profit taking on long positions in RUB ahead of the weekend. At the end of the day, RUB lost near 3.0% against USD, closing at 53.58. Meanwhile, Brent rose 2.7% to USD 57.3/bbl. The average EM FX index slipped 0.5% against USD, driven by the weak performance of MXN and ILS, which lost 0.9%. Besides, ZAR and BRL nudged down 0.5-0.6%, while commodity-based NZD corrected down 0.4%.

On Friday, the CBR hiked the rates on its FX refinancing facilities, defending its decision by pointing to stabilisation on the Russian FX market. As of today, the minimum FX repo rate at the one-week and 28-day auctions will be corresponding LIBOR + 150bp; the rate for the one-year facility is set at LIBOR + 175bp. The regulator also increased the rates on FX 312-P instruments, setting them at LIBOR + 175bp for 28-day loans and LIBOR + 200bp for one-year funds. Hence, the CBR increased rates 50bp for short-term liquidity and 75bp for one-year auctions, as compared to the previous decision on 27 March. This week, banks need to refinance USD 4.0bn of FX repo debt, but we believe that it is still doable, despite the increased cost of FX liquidity.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts

CBR, ruble, FX market

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