In the morning, RUB slipped to 57.00 against USD, dragged down by the oil market, which traded near 3.0% in the red. However, that turned out to be a strong support level for the Russian currency, so it marked there for most part of the Moscow session. In the evening, Brent gained momentum, climbing to USD 57.7/bbl (+0.8%) by the close. RUB immediately followed crude, eventually firming 0.2% against USD (56.41). The EM FX universe traded mixed yesterday. Asian currencies remained under pressure, with KRW falling 1.0% and SGD weakening 0.3%. At the same time, ZAR bounced 1.0%, accompanied by TRY (+0.6%) and MXN (+0.3%). Commodity-based currencies felt better, with AUD and NZD recovering 0.6% and 0.3%, respectively. However, NOK surrendered another 0.2%.
The one-week FX repo auction garnered feeble demand, with banks taking only half of the offered USD 100mn; the average rate was set at 2.15%. Today, the tax period begins, but the key payment dates are still far ahead: VAT and MET are due on 27 July, while corporate profit tax comes on 28 July. We believe that oil is to remain the key factor for this week, but so far fundamentally it is providing no supportive outlook. The breakthrough deal between Iran and the P5+1 countries, after more than ten years of on-off negotiations, is potentially transformational for the Middle East, and could substantially constrain the upside for the oil market for a number of years. The main concern in the near term is the reaction from the rest of OPEC over the coming months. Saudi Arabia, Iraq and the UAE have already increased output to record levels in each of the last three months, and it seems that OPEC output in 2H15 might go above 32mmb/d, thus keeping the global market surplus at close to 2mmb/d.