May 14th, 2008

RUB
- RUB weakened further against the USD/EUR basket as dealers cited a big client order and doubts of the CBR letting the ccy appreciate
- speculative position growing as banks taking "short positions against the basket"
- Putin signaled "okay to live with double digit inflation for the next few years"
- CB uses a dual ccy basket of 0.55 dollars, 0.45 euros
- weakaned 10 kopecks from 29.61 t 29.71
- on Tuesday Medvedev appointed Akrady Dvorkovich, an opponent of RUB appreciation as top economic aide
- FM Alexei Kudrin who has argued with Dvorkovich over whether economy is overheating also kept his post
- in statement CBR said the "situaton in the local FX market, the trade balance, and the federal budget will be the aims of intervention as opposed to current aim of avoiding sharp fluctauations in RUB moves against basket"

South Africa

Vietnam
- gained the most since 21Mar 0.13% to 16,132.50 as CB sold FX to support the currency
- State bank will sell foreign currency to meet demand from commercial banks to lend to its customers to import gasoline
- State bank raised interest rates, increased reserve requirements, and allowed dong to strengthen to cut money supply and slow inflation
- 29Apr the commercial banks agreed to raise dong interest rates by 1% to 12%

Shortcovering in USD/Asia continued even as Asian equities were positive across the board. China curve shifted way right along with USD/INR and USD/PHP hitting recent highs. We view these moves to be driven more from positioning rather than an overall shift in fundamentals. US equity markets roared ahead on the back of a positive CPI number and overnight selloff in EM retraced as ZAR, TRY, HUF all came off their highs. General USD strength with EUR touching down to 1.5396 and USD/JPY breaking 105 to a high of 105.45.