Russia FX Beat - January 17, 2018

> Today's focus. US shutdown nears. Russia current account and CPI data due, Nabiullina speaks.
> Global trigger: US shutdown concerns. Overnight, EUR/USD touched a new high of 1.2323 before reversing to back below 1.2250. Nervousness about the dollar is understandably on the rise as Friday's potential US federal government shutdown nears.
The euro was also led lower by two of its own local stories. It was reported that elements of Germany's SPD party do not want to start coalition talks with Chancellor Merkel. In addition, ECB member Francois Villeroy said that recent euro gains were a "source of uncertainty which requires monitoring." The uncertainty surrounding German politics and the ECB give investors reason not to presume a march higher in the euro.
Today will see many releases (Eurozone CPI, US industrial production and the Fed's Beige Book), but we doubt any of them will significantly alter DM currency markets.
> Bottom line. For the time being, a break in the DXY Index below 90 should be averted.
> Regional trigger: Nabiullina comments. USD/RUB held steady yesterday in a range of 56.30-56.50. The ruble was one of the only currencies to hold its own against the dollar, helped by strong demand on the local market, which essentially offset a decline in Brent toward $69/bbl.
Today sees weekly CPI and 4Q current account data, both to be released at 16:00 Moscow time. A surplus of $11.5 bln is the Bloomberg consensus for the latter. That would take the full-year surplus to $34 bln, above the $25 bln one recorded in 2016. Looking ahead, given the prevailing price of oil, we anticipate a bumper surplus in the region of $35 bln in 1Q18.
Today, the Finance Ministry will hold sizeable OFZ auctions. It is to offer R25 bln of bonds due in October 2024 and R15 bln of bonds due in March 2033. Failure to place all of the bonds for a second week in a row would be noteworthy. In addition, CBR Governor Nabiullina is expected to speak at a forum between 15:30 and 17:30.
> Bottom line. USD/RUB has moved above 56.50 in early trading today. A stabilizing dollar and softer oil price might mean that the ruble will struggle to retest its recent highs in the very near term. We expect a 56.50-57.00 range for USD/RUB to prevail.