Yesterday, the Russian FX market had a strong session, fully disregarding shaky oil dynamics. Trading activity was solid, with the MICEX printing USD 4.8bn of turnover. RUB opened slightly firmer, marking near the 55.10 level in anticipation of the CBR decision. Immediately after the press release, RUB saw a short-lived volatility spike, but quickly returned to the 55.10 mark. However, by the end of the day, RUB strengthened to 54.52 (+1.3%) against USD thanks to crude’s recovery and the slightly hawkish comments from CBR Governor Elvira Nabiullina. Brent started the session with a dip to USD 61.7/bbl, but managed to recover a bit, ending the day at USD 62.3/bbl (-0.7%). The EM FX universe slipped into the red, with the EM FX index declining 0.2%. TRY lagged peers, losing 0.8% during the day, while ZAR closed 0.2% weaker. Commodity-based currencies traded a tad stronger: NZD added 0.2% and AUD rose 0.5%.
As we expected, the CBR decision had no impact on RUB, as it was largely priced in. In the near term, the balance on the market might shift to exporters, which are likely to start preparing for the tax payments soon. In the medium term, we see capital outflows increasing. Separately, we highlight that yesterday, the 28-day FX repo auction garnered modest demand, with banks securing only USD 610mn out of USD 1.1bn offered. The average rate was set at 2.20%. Hence, if banks ignore the one-week auction once again today, the total FX repo debt to the CBR is to decline to USD 33.0bn this week.