Russia FX Beat - October 2, 2017

> Today's focus. Dollar momentum grows, turmoil in Catalonia.
> Global trigger: Dollar momentum. After six months of decline, the dollar stabilized in September, gaining 0.5%, as measured by the DXY Index.
The prospects for dollar strength in the week ahead are also reasonable, with expectations of a Fed rate hike and tax reform in focus. Data-wise, markets will focus on the September US jobs report on Friday, while Fed Chair Yellen speaks on Wednesday. On Friday, President Trump said that he would decide within three weeks who would be the next Fed chair when Yellen's term expires in February. This looks to be a dollar-positive story for now, since most alternatives to Yellen are considered more hawkish.
Today, ISM US manufacturing data comes out at 17:00 Moscow time and Fed voter Robert Kaplan speaks at 21:00. The main focus, however, will be on the controversial independence vote that happened over the weekend in the Spanish region of Catalonia. The outcome could result in serious political turbulence in Spain and translate into a more negative tone for the euro in the short term.
> Bottom line. EUR/USD to test the 1.1715-1.1720 area.
> Regional trigger: Interim dividends. The ruble ended September flat on the month. Amid the better supported dollar, this represents a good performance. EM peers such as the ZAR (-5%), TRY (-4%) and MXN (-2%) all fell.
For now, Brent has clearly rejected a move above $60/bbl and, in fact, a test of $55/bbl might not be too far off. Data released on Friday showed the US oil rig count had risen for the first time in seven weeks.
Locally this week, the main focus will fall on September CPI data, likely to arrive on Thursday. The consensus expects the y-o-y rate to ease to 3.2% from 3.3% last month. Our economists see downside risk to this, with a 3% reading possible.
In October, the bulk of 2017 interim dividends are to be paid, about $3 bln of the $6 bln total. Similar to the main dividend season in July, we expect the net impact on the ruble to be negative. Exporters will sell a limited amount of FX to raise rubles for dividends, while shareholders are likely to convert the majority of payments into FX. On a net basis, FX buying for dividends this month might exceed $1 bln. The amount is far lower than in July and its influence will likely be limited amid a seasonally stronger current account and elevated oil prices.
> Bottom line. USD/RUB likely to hold near the 58 level today.