Most of yesterday’s session in the Russian exchange market was inactive, in terms of both price action and flows: the MICEX reported only USD 3.4bn in USDRUB turnover. In the morning, RUB opened stronger amid a crude oil bounce, but later on USDRUB stayed in the 50.30-50.60 range until the evening. A couple of hours before the bell, USDRUB approached 50.0 but it finally closed at 50.32. RUB firmed 1.0% vs. USD. Interestingly, Brent ended the day deeply in the red, having lost 3.1% in price. The EM FX index weakened 0.2-0.4% vs. USD, and NOK slipped 0.2%, while AUD and NZD were down 0.6-0.7%. Therefore, RUB visibly outperformed its peers yesterday.
Overall, we think that the current USDRUB trading levels are justified, if one pencils in an average Brent price of USD 65-70/bbl until the end of the year and, more importantly, assumes that the negative effects of Russian borrowers’ lack of access to the international capital markets dissipates and does not have any adverse impact on capital flows in the foreseeable future. However, we highlight that in terms of external debt redemptions, April and May were the lightest months, while in June the amount of external debt due rises 2.5-3.0x from the May figures.