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RUB: taking some back


Yesterday, USDRUB opened higher (a rather usual price action of late) at 53.65, but quickly made a U-turn, slipping to 53.20 by the middle of the day. Later, RUB continued trading on a stronger footing to close at 52.85 against USD (+1.4%). In our view, price swings in the Russian FX market were mostly driven by global factors (mainly DXY’s retreat) rather than any change in domestic flows or sentiment, which prompted some market participants to take profits in USDRUB. However, we still expect higher external debt payments, dividends and a potential bounce in demand for hard currency from households to shape the market’s performance in the coming months.

Meanwhile, Brent surged 0.5% to USD 64.4/bbl, providing support for the Russian currency as well. The EM FX index ended 0.5-0.6% in the black, with ZAR up 0.6%, TRY gaining 0.3%, MXN rising 0.4% and BRL surging 1.2%. Commodity-linked currencies outperformed, with NOK 1.6% stronger at the end of the day, while AUD rallied 2.2%. Overall, DXY is now flirting with its 100MA (and some other technically strong resistance levels), which have been providing support lately. In that sense, Friday’s publication of the US jobs report is important, since it could push the trend either way, we think. Meanwhile, yesterday’s bounce in risk appetite was Greece-related, as press reports suggested that some sort of last-minute deal which buys the Greek government time is being considered. The ECB also holds its policy meeting today, while the publication of the ECB’s Economic Outlook containing updated economic forecasts for the major economies is in focus as well.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts


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