Forex Insights: the USD/RUB Currency Pair

The USD/RUB pair stands as one of the most significant currency duos across the globe, though it doesn’t rank as the most liquid. It reflects the ratio of the value of the US dollar to the Russian ruble and is of interest to both currency traders and investors. Even more so, it serves as a barometer for Russia’s economic health.

Formally, the pair emerged in 1992 after the collapse of the USSR and Russia’s shift toward a market-based economy. For many years, the US dollar has played a central role in international transactions, with the ruble pegged to a dual currency basket. However, since 2014, the ruble has been gradually losing ground against the dollar, thanks to a medley of economic and political factors.

The dynamics of the USD/RUB currency pair is influenced by a variety of external and internal factors, including: shifts in the interest rates set by the US Federal Reserve System, economic growth and recession tends in the United States and worldwide, sanctions, the state of the Russian economy, and the monetary policy adopted by the Central Bank of Russia.

The Russian economy relies significantly on its exports of oil and natural gas. As one of the top three global crude oil producers, any changes in worldwide oil prices directly impact the ruble’s value. Historical data illustrates a robust connection between declining oil prices and the ruble’s depreciation. To illustrate, the sharp drop in crude oil prices at the start of the COVID-19 pandemic substantially bolstered the USD/RUB exchange rates in 2020. As global energy prices fluctuate, so does the ruble’s strength, underscoring the importance for traders and investors to closely monitor developments in the global energy markets.

Economic sanctions imposed on Russia by Western nations have significantly influenced the ruble’s performance. These sanctions, particularly those targeting Russia’s energy sector, have considerably strained the Russian economy. They have disrupted Russia’s trade relationships and resulted in a reduction in foreign investment. In the face of these difficulties, Russia has endeavored to minimize the repercussions by, for instance, requiring trade partners to use the ruble for import payments and promoting the Mir payment system.

In reaction to external economic pressures, the Central Bank of Russia has instituted various capital control measures to stabilize the ruble. These measures encompass restricting foreign currency sales, limiting withdrawals from foreign currency accounts, and conducting foreign currency interventions. While these actions have provided short-term relief to the ruble, critics argue that such measures give the currency an artificial sense of strength.

On September 15, a report of the Central Bank of Russia regarding a shift in the interest rates was released, as scheduled in the economic calendar. The current rate now stands at 13%, marking the fourth consecutive increase. This represents a 1% uptick compared to the previous month.

Given the relatively modest increase and the fact that the report was released on Friday, market activity remained subdued — there were no notable changes in the USD/RUB exchange rate, and the ruble didn’t experience any discernible consequences.

Taking a look at the chart, it’s evident that the price is trading within a horizontal corridor of 92.00-100.00. To put it simply, the upper boundary is defined by a resistance level, marked by the historical milestone of 100.00, often referred to as a psychological barrier. Meanwhile, the lower limit rests at a relatively new level of 92.00.

For now, it’s safe to assume that the ruble will continue to weaken in the coming years, especially given the current economic and political situation in Russia and the broader global arena. Nevertheless, the Russian economy holds potential for growth, which may contribute to the ruble’s strengthening in the long term, particularly in light of the development of the extractive and industrial sectors.

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