Russia FX Beat - August 10, 2017

> Today's focus. Profit taking.
> Global trigger: Geopolitical tensions. DXY and US Treasury yields were relatively balanced yesterday despite the elevated tension between the US and North Korea. Global FX markets experienced generally mild sessions. With many DM equity indexes trading near record highs and yield premiums on high-yield debt reaching fresh lows, most large real money funds were taking profits.
We expect further profit taking in the currencies most overvalued against the USD, such as the EUR, and we expect further bids in USD/RUB. Oil prices are not providing much support for export-oriented EM. Yesterday's weekly EIA data was mixed but generally positive for the market, pushing Brent closer to $53/bbl. The key positive factors were a major 6.45 mln bbl drawdown in US crude inventories and refinery runs reaching 17.57 mln bpd, the highest level since records began in 1989, which took the refinery utilization rate up to 96.3%, its highest level since 2005. Crude oil imports dropped. The one negative was a 3.42mln bbl rise in gasoline stockpiles to 231.1 mln bbl, the first increase in eight weeks and largest since January, as a result of the highest rise in gasoline imports in six years.
Elsewhere last night, Chicago Fed President Charles Evans said it would be "reasonable" to announce the beginning of a reduction of the central bank's balance sheet in September. He remained dovish on interest rates, in line with recent comments by his colleagues, James Bullard and Neel Kashkari.
> Bottom line. EUR/USD is facing strong support at 1.1720. With bearish sentiment prevailing, we could see the pair reach 1.1670 or below.
> Regional trigger: USD/RUB bids still offsetting offers. Despite low volumes, USD/RUB volatility is picking up. Active bids dominated in the first half of yesterday, with locals pushing USD/RUB to an intraday high of 60.22; however, some exporters were happy to sell at this level, which pushed USD/RUB back to 60. We are generally seeing more demand for dollars from importers and some international accounts on the back of profit taking.
The current account deficit reached $1.3 bln in July, and we expect it to widen further in 3Q. Weekly inflation data continues to indicate deflation, with prices down 0.1% last week. YTD inflation now stands at 2.3%, compared with 3.9% a year ago.
> Bottom line. We expect range trading of 50.80-60.20 today.