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RUB: behind the EM FX universe


RUB reacted negatively to the news about the CBR’s FX repo rate hike. As soon as the headlines hit the wires, USDRUB spiked from 51.5 to 52.9. At the end of the day, RUB closed at 53.39 against USD (-2.7% to Friday). Meanwhile, the highest print of USDRUB was 53.80, but in the evening bounce of crude oil helped to take some pressure off RUB. Hence, Brent traded almost 2.0% in the red during the day, just to close flat at USD 61.2/bbl. Overall, we think that the rise in the CBR’s FX repo was a catalyst for, but not the reason behind, the weakness of the Russian FX market that was predominantly driven by technical factors during the previous weeks. As we have argued before, we do not think that higher rates on the CBR’s FX repo would push the Russian risk premium, which now looks reasonably priced.

The EM FX index closed 0.4% weaker, dragged down by MXN and ZAR, which slipped 0.8% and 0.6% against USD. At the same, KRW and BRL enjoyed stronger risk appetite, rising 0.4% and 0.3%, respectively. Commodity-based currencies remained on a softer footing, with NOK falling 0.6% and AUD correcting down 0.7%.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts


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