Russia FX Beat - October 25, 2017

> Today's focus. US dollar well supported, Russia tax day.
> Global trigger: Watching 2.40%. EUR/USD was little changed yesterday, as thoughts of a hawkish ECB outcome tomorrow supported the euro. In general, the dollar was again in the ascendancy against most currencies, helped by rising UST yields.
We note that the UST 10y has climbed to 2.40%, a rise of almost 40 bps since the test of 2.00% in early September. This point in time also coincided with a low for the DXY Index, which has since appreciated by 3%.
The dollar has also gained around 4% against EM currencies. However, within the EM space, its performance has varied, with the likes of the Mexican peso and Turkish lira down 8%. At the other end of the spectrum, the Kazakh tenge (+0.3%), Israeli shekel (+0.3%) and Russian ruble (-0.4%) have proven resilient.
Today, investors will watch for German Ifo survey data (11:00 Moscow time), UK 3Q GDP (11:30) and US September durable goods data (15:30). The durable goods release will help shape expectations for US 3Q GDP on Friday.
> Bottom line. Despite some worthwhile data today, we doubt EUR/USD will be much moved ahead of the ECB decision.
> Regional trigger: CPI and inventories. As we note above, the ruble is strong in the face of an appreciating dollar. No doubt, an oil price that has gained 5% over the aforementioned period has helped. However, declining sovereign risk (the Russia 5y CDS, at 130 bps, is at its lowest since 1H13), ruble volatility (lowest since mid-2014) and inflation (resulting in still very high real interest rates) are all supporting the ruble.
Yesterday, the CBR held 1w deposit and 3m coupon bond auctions with limits of R1,110 bln and R500 bln. Demand for the coupon bonds was quite low at R176 bln, while bids at the deposit auction exceeded the limit by R338 bln. It seems that banks are currently reluctant to lock in rates for 3m, preferring 1w. The liquidity redistribution in money markets due to the coupon bonds will be limited, so O/N rates should remain rather low.
Today, weekly Russian CPI (16:00) and US oil inventories (17:30) are due. It is also the main tax day in Russia this month (more than R700 bln is due), so the ruble should stay resilient.
> Bottom line. Yesterday, a portion of dividends was converted to hard currency, pushing USD/RUB toward an intraday high of 57.70 - a level where exporters stepped in to sell FX for tax payments. This balance may be repeated today.