Yesterday’s session was rather volatile for the Russian FX market, though oil did not post any substantial swings, and made timid attempts to recover. Trading flows declined a bit, but still remained decent, with MICEX turnover amounting to USD 6.2bn. At the opening, RUB strengthened to 68.40 against USD, but the momentum soon faded, and in the afternoon USDRUB was already flirting with 70.00. Brent was trading in a quite narrow range of USD 43.1-43.6/bbl, and even fresh EIA crude stock statistics failed to shape any particular trend on the market yesterday. The data was mixed: US crude inventory fell 5.5mn/bbl, but product stockpiles rose unexpectedly. The knee-jerk reaction to the news was Brent’s move below USD 43/bbl; but soon oil bounced, returning to USD 43.6/bbl in the evening. The fragile recovery on the oil market improved risk sentiment on the Russian market, so the second half of the day RUB regained positions, firming to 68.63 (+0.1%) against USD by the close. Meantime, commodity-based currencies remained on a softer footing, with NOK falling 1.8% and NZD slipping 0.5% yesterday. The EM FX universe traded mixed. MXN rose 1.2%, followed by ZAR and BRL, which gained 0.5-0.6%. At the same, ILS remained under pressure, losing another 1.7%, while Asian currencies closed 0.1% in the red.
Crude remains the driver for the Russian FX market. As we have argued before, in our view, RUB had run slightly ahead of peers, pricing Brent at USD 40/bbl. Therefore, some stabilisation on the oil market (not speaking about a recovery) would likely fuel some profit taking on the long USDRUB positions.