With the end of US holiday, trading activity increased a bit, but still remained moderate: MICEX reporting USD 3.9bn of turnover (although trading was halted for a couple of hours due to a technical malfunction). Oil settled on an upward trend right from the morning, driving sentiment on the Russian FX market. Hence, RUB opened stronger, touching 68.50 against USD. In the afternoon, Brent reached USD 49/bbl, helping RUB to approach 68.00, but oil’s sudden dip to USD 48/bbl sent USDRUB temporarily back to 68.90. In the evening, risk sentiment revived, and Brent ended the session at USD 49.5/bbl, gaining 4.0% during the day. The recovery in the oil market translated into RUB’s performance, although as in the last few days its reaction was rather muted: RUB firmed only 1.7%, rising to 67.95 against USD.
The EM FX universe traded on a stronger footing, with the EM FX index rising 0.8% yesterday. ZAR outperformed (+1.8%), followed by MXN (+1.0%) and ILS (+0.8%). Commodity-based currencies were up too, with NOK increasing 1.1% and NZD gaining 1.3%. As we have highlighted before, RUB's beta against crude oil has remained asymmetric since the end of August and, if the sluggish EM FX performance this month might at least partially explain that, yesterday’s risk-on trading session looks puzzling, in our view. If oil stays around USD 50/bbl, we think that RUB has room to appreciate, since there are no signs of savings dollarisation, while yesterday's news of EuroChem's new USD 750mn pre-export facility is a reminder that the international markets are not completely shut for Russian borrowers.