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RUB: ahead of peers


Yesterday, the Russian FX market turned around again, benefiting from oil’s recovery and the calm newsflow from Greece. RUB opened stronger, promptly touching the 55.60 level, but the next move came in the afternoon, when Brent scratched USD 62.0/bbl. In the evening, the oil market started to lose momentum, but a knee-jerk pull-back in the US dollar after the US jobs report helped RUB to hold its position. As a result, RUB firmed to 55.52 (+0.6%) against USD, while Brent closed at USD 60.8/bbl, surrendering 0.2% during the day.

In the absence of breaking headlines about Greece and given USD’s weaker performance, the EM universe also found firmer ground. The EM FX index rose 0.5% yesterday, supported by BRL (+1.7%), ILS (+0.4%) and MXN (+0.8%). At the same time, commodity-based currencies continued to trade in the red amid news about a pick-up in EIA US crude stocks. Hence, NOK declined further 0.4%, AUD and NZD slipped 0.2%.

The US jobs report was quite decent, with nonfarm payroll employment rising 223k in June (in line with consensus) and the unemployment rate falling to 5.3%, a seven-year low. However, a 60k net downward revision to the employment statistics in the two previous months and moderating earnings growth added bitter notes, pushing the US 10-year Treasury yield and the US dollar down. Nevertheless, we believe that this does not necessarily rule out a rate hike at the 17 September FOMC meeting.

Separately, Finance Minister Anton Siluanov told Interfax yesterday that the ministry was ready to resume FX purchases into the Reserve Fund were oil to go above USD 70/bbl. He noted that this would help to support the level of reserves, which would likely be substantially depleted in the next three budget years, as well as to restrain excessive RUB strengthening, which could improve the economy’s competitiveness. The news had no effect on the market yesterday.

Yesterday, the overnight FX swap continued to decline, nudging down to 11.30% (-66bp) at the close. The weighted average rate moved down 20bp, printing at 11.82%. Consequently, the CBR’s FX swap facility remained untapped again, while the volume of fixed-rate repo operations decreased to RUB 106bn. The Treasury deposit auction garnered modest demand, with only RUB 11bn being allocated out of RUB 50bn offered; the weighted average printed 11.80%. On a net basis, it was just a rollover of maturing funds, so today the volume of Treasury deposits is to remain flat at RUB 219bn.

The NDF/XCCY curve was little changed, with only the 1M rate slipping 6bp to 13.32% while the one-year XCCY tenor rose to 12.13% (+18bp). At the same time, the IRS curve shifted up 3-5bp and the one-year rate nudged down to 12.44%.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts


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