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RUB: export on the spikes


Yesterday, the Russian FX market saw marked volatility. RUB kicked off on a softer footing right from the morning as global risk sentiment was undermined by concerns over Greece debt talks which, among other things, pushed the price of Brent crude oil down 1.4% to USD 60.5/bbl by the close. Hence, USDRUB quickly surged to 55.60 at the opening, but then retreated down to 55.30 as the market revealed a visible offer from exporters. Later in the day, USDRUB attempted twice more to break the 55.60 level, but only after the bell in Moscow it managed to close at 55.75.

Therefore, RUB weakened 1.7% against USD, and underperformed peers. In particular, the EM FX index declined only 0.2-0.3% amid a mixed performance from underlying currencies: specifically, TRY weakened 1.5%, while KRW and MXN were down near 0.8%, but BRL ended 0.4% in the black. Meanwhile, NOK surrendered only 0.3%, while AUD and NZD strengthened marginally. We stick with the view that intensifying capital outflow is to shape RUB’s performance in the coming months. We also highlight that the tax period is now over in Russia, so exporters’ hard currency selling could potentially subside. Separately, Greece remains top of the agenda.

Yesterday, the markets reacted negatively to the news late last Friday night that Greece is to hold a referendum next Sunday. The imposition of capital controls dented European bank stocks and peripheral Eurozone yield spreads widened. Today's payment of EUR 1.5bn to the IMF is likely to be missed. The referendum destabilises the dynamics of the debt negotiations and opens up a myriad of scenarios. The markets are raising the odds of a Grexit, though this does not yet appear to be the preferred option of the Greek people or, indeed, explicitly of the Greek government. Adding to the market volatility is the more than 20% slide in the Shanghai Composite from this year's high, despite fresh monetary stimulus at the weekend. Margin calls could increase the tension.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts


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