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RUB: cruising lower


Yesterday, RUB opened under visible pressure right in the morning as USDRUB quickly by-passed 53.0 and hit 53.50 within a couple of hours of the MICEX opening. However, that proved to be a strong resistance level, as many market participants started taking profits on USDRUB longs opened, perhaps, last week. Concerning the morning price action, it is quite likely that some corporate bid was behind it, in our view. In the middle of the session, USDRUB slipped to 53.0, buoyed by an intraday recovery in the crude oil market. However, Brent spot ended the day marginally in the black, at USD 64.1/bbl (+0.3%), whilst the nearest futures closed 1.0% in the red. In the end, RUB weakened 2.3% to USD, closing at 53.57. The continued DXY recovery (+0.5% yesterday) undermines the performance of the commodity markets and sets the background for global EM weakness. Hence, the EM FX index closed down 0.3-0.4% yesterday, with ZAR ending 0.9% in the red, TRY down 0.7% and MXN slipping 0.7%. In addition, NOK dropped 2.3%.

Separately, we highlight that banks secured USD 2.5bn at the 28-day FX repo auction amid a USD 2.6bn offering size. The average rate printed at 2.18%. Overall, today banks are to see a near USD 110mn outflow in 28-day FX repo outstanding. In addition, the Treasury raised zero bids in 29-day FX deposit (unsecured) auction for USD 0.5bn with the minimum rate set at 2.0%, i.e. below the CBR's benchmark. Overall, banks currently do not have any issues with FX liquidity, as pointed out by the stable RUONIA-overnight FX swap spread.

Maxin Korovin, Tatiana Zueva
VTB Capital analysts


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