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RUB: more of the same


The Russian FX market is still overwhelmed by retail flows that remain a strong sell. Hence, yesterday RUB opened 1.0% stronger, additionally supported by crude’s recovery. Later, we noted some bids emerging near the 51.3-51.5 USDRUB area. However, in the evening, the EM FX space gained as US data disappointed slightly, opening the way to 51.0 for USDRUB. We believe that technical factors also drove the move: it is likely that market participants had closed intraday USDRUB longs they opened in the morning. The market balance is still skewed toward RUB buyers, while those who are trying to play from the bid side have set close stop-losses. RUB ended the session at 50.94, advancing another 2.6% against USD; Brent increased 1.6% to USD 57.59/bbl.

Commodity-based currencies finally caught onto crude’s upward trend: NOK gained 1.9%, NZD added 0.9%, and AUD increased 0.5%. EM FX closed 0.6% firmer, with BRL climbing 1.9%, and MXN and ZAR 0.8-1.1% higher.

Yesterday, the CBR cut the limit on the one-week FX repo to USD 1.5bn (vs. the USD 3.0bn limit set last week). However, we believe that this decision was one of a purely technical nature, as historically, one-week funds have been less popular among the banks, with demand rarely exceeding half the offer. Yesterday’s auction was not an exception, with total demand of just USD 572mn, at an average rate of 1.76%.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts

ruble, FX market

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