On Thursday last week, RUB saw visible pressure in the morning ahead of the CBR’s meeting. USDRUB spiked to 51.85 before it, but dropped to 51.30 shortly after.
Nevertheless, RUB ended the session near 1.1% weaker against USD, at 51.59. At the same time, Brent continued on a strong footing to close 1.9% in the black at USD 64.9/bbl. We think that the Russian FX spot market remains in the arms of technical factors and flow-driven. Hence, we suppose that with the end of the tax period, hard currency selling flows from exports diminished, which caused RUB’s weakness as the bid kept stubborn. During the May holiday period, RUB weakened further (albeit in the absence of strong flows) with USDRUB now trading near the 52.0 level. We note that the EM FX index has declined 1.7-2.1% during the last two trading days, with ZAR and TRY down 2.0-2.3%, while BRL slipped 4.1%. In addition, NOK erased 1.0% of its value as crude corrected lower, whilst AUD and NZD were down near 2.0%.
Maxim Korovin, Tatiana Zueva
VTB Capital analysts
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