Yesterday, RUB appreciated another 0.9% against USD, ending the session at 49.10. Trading volumes on the MICEX remained subdued, at USD 3.2bn, while export selling flows were mainly seen in the first part of the day. As a result, USDRUB tested the 49.00 level in the morning, but found a strong resistance level there, consolidating in the 49.10-49.20 range for the rest of the day. Oil’s attempt to recover failed yesterday, with Brent slipping to USD 65.6/bbl (-0.3%), peaking by midday at USD 67.0/bbl. EM currencies lost ground on Monday: the EM FX index declined 0.4% against USD, dragged by ILS (-1.0%), MXN (-0.7%) and ZAR (-0.7%). Commodity-based currencies also traded in the red, lacking support from the oil market: NOK and NZD weakened 1.2-1.3%, while AUD decreased 0.6%.
Yesterday, FX repo auctions were in the spotlight, as the CBR decided not to conduct the one-year auction for the first time since launching the facility. A brief rationale for the decision was published in the evening, citing developments in the domestic FX market as the key reason. We think it logically complements the CBR’s recent decision to begin outright FX purchases on the open market, rather than signalling a change of heart for the FX refinancing programme as a whole. For several weeks, demand at the one-year repo auction has hardly exceeded USD 800mn, so the news put no pressure on RUB yesterday. We believe that it was a market-dependent decision and the CBR is to resume one-year auctions when it sees real demand for them. Meanwhile, at the 28-day repo auction, banks secured USD 1.1bn of USD 1.9bn on offer; the average rate printed 2.20%.