Russia FX Beat - October 9, 2017

> Today's focus. US holiday as EU politics takes center stage.
> Global trigger: European politics. Friday's hurricane-impacted US jobs report left the dollar virtually unchanged. Overall, the currency remains well supported, as expectations for a 4Q Fed rate hike have hardened and the possibility of tax reform has resurfaced. The fact that the dollar cheapened in 3Q also means that it is appreciating from a lower level.
The week ahead is relatively quiet in terms of scheduled events. In the US, the highlights will be the release on Wednesday of the minutes to the Fed's September 19-20 meeting. Following this, on Friday, September CPI data will be released.
In Europe, the focus is politics, particularly in Spain and the UK. Over the weekend, protests were held in Spain against the recent referendum in Catalonia, and the leader of the region pledged to continue pushing for independence. Meanwhile, the UK and EU today start another round of Brexit negotiations. This comes at a time when the UK government is in disarray and ahead of a key EU leaders' summit on October 19.
> Bottom line. The Columbus Day holiday in the US will result in a quiet day of trading. EUR/USD is biased lower toward 1.17.
> Regional trigger: Interim dividends. The dollar reached a low point on September 8. Since this, the DXY Index has recovered by 3%. In many instances, EM currencies have fallen further than the dollar index has risen, with the Turkish lira down 8%, the South African rand down 6% and the Mexican peso down 5%. In this context, it is quite impressive that the ruble has fallen by less than 2%.
This week sees an acceleration of interim dividend payments. By October 10, Severstal and Acron are to pay about R18 bln ($310 mln) and R9.5 bln ($160 mln), respectively. On a net basis (i.e. dividend-related FX buying less selling), we estimate that $300 mln could be converted into hard currency late this week or early next week. This is unlikely to significantly impact USD/RUB if exporters are active and oil prices remain well supported.
On Friday, MICEX turnover was high, with exporters actively selling FX. This should continue today, with USD/RUB above the CBR's fixing of 57.76.
> Bottom line. The focus today will likely be on the sharp loss in the Turkish lira overnight. Any USD/RUB gain should be capped near 58.50.