Yesterday’s session in the Russian exchange market was predictably slow, with MICEX reporting total turnover of just USD 2.3bn. International investors were absent as the US and UK markets were closed for the public holidays. In the morning, RUB opened stronger, buoyed by the continued export-related selling flow and relative stabilisation in the crude oil market. Hence, USDRUB initially touched 49.80, but found decent resistance at these levels. At the end of the day, RUB settled at 50.02 against USD (-0.03%). Meanwhile, the EM FX index traded on a softer footing, declining 0.2-0.3% vs. USD, with TRY down 0.6% and ZAR weakening 0.4%. Commodity-based currencies closed mostly flat.
We think that export-related hard currency selling now provides the key technical support for RUB, as companies entered the last week of the tax period. However, with the beginning of the new month, that flow might subside. On the other hand, external debt payments in June are to be more than twice as much as in May. That comes together with a pick-up in dividend payments and perhaps higher demand for hard currency from households as the more active holiday period approaches.
Separately, we highlight that the CBR cancelled the one-year FX repo auction yesterday, citing strengthened sentiment in the exchange market. Meanwhile, in the one-month FX repo auction, the regulator offered USD 1.4bn, but banks secured only USD 1.3bn at an average rate of 2.19%, which is below the rollover requirements. Additionally, the CBR continues its USD 200mn daily FX purchases.