Currency Cross Rate Analysis for USD/RUB | USD RUB forecast

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Currency Cross Rate Analysis for USD/RUB

Currency Cross Rate Analyses for USD/RUB

“USD/RUB” is a representation of the cross between the base currency USD (the official currency of US), and the RUB (which is the Russian ruble; the Russia’s official currency). Using data obtained OANDA to obtain the average between the New York’s open and close prices for the USD/RUB, Graph 1 below was realized. Therefore, herein, with the consideration of the exchange rate fluctuations as presented on the graph, an attempt is made at analyzing the causative agents of the various price movements.

Graph 1: The Average Exchange Rate Changes for the USD/RUB between January, 16 2017 and April 6, 2017.

Currency Cross Rate Analysis for USD/RUB   

Exchange Rate Overview

By taking an overall view of the graph above, it is indeed clear that the Russian Ruble has increased in value against its Dollar counterpart since the beginning of the year. However, there are periods in which the reverse occurs, namely: During the period around the beginning of the second month (February) of this year (2017) and between mid-February to mid-March. The latter period keeps the largest portion of the uptrend. Otherwise, the Ruble has seen a sharp rise of value against the dollar for the rest of the period.

Causative Agents

  1. Economic

Albeit Russia’s Balance of Payments has seen some reductions in the past year, the Russian has employed two strategies as a direct attempt to influence the exchange of the Ruble against other currencies such as the dollar. These are: The overall reduction of its foreign debt and the increase of its foreign currency reserves (we can see this when Russia’s central bank strengthened the Ruble in May 2015 by directly buying foreign currency). [2] These two factors may be the cause of its current trend at strengthening over the dollar over the past three months. However, the current exchange rate of the Ruble seems to be hugely affected by the Oil prices (its major export commodity that bears the greatest influence on the current account and ability to increase foreign asset ownership); a major factor that the BoR (Bank or Russia) looks at before considering the implementation of any interest-rate cuts or Moscow’s intervention by buying foreign currency with excess income received from the sale of its oil reserves. 2

However, the recent strengthening of the ruble, as seen on graph, one is likely to be temporary based on the indifferent stance BOR has towards interest-rate cuts; a strategy that is considered a major stabilizer of the current huge gap seen between the ruble’s exchange rate and its purchasing power parity (PPP), even though this gap has been labelled to be better than Portugal (an EU country that has seen the value of its currency rise against the dollar).

  1. Political

The largest political event that has been speculated to have a major influence on USD/RUB exchange rate is the recent election of Trump into presidency. His policies on employing various economic stimuli with greater economic ties to Moscow may have resulted in the jolted gain of the ruble that was seen during the last week of January.[4] In fact, immediately after Trump’s election the value of Ruble is said to have rallied; however, the same contrary event can be seen when the ruble was weakened by Obama’s sanctions after Putin decided to annex the Ukraine.

Conclusion

To sum it up, the current rise in value of the ruble has been owed to the recent political election that saw Tramp become the president of the US; an event highly speculated to increase the Moscow-US ties and alleviate the effects of the 2014 sanctions. Other supporting factors have been economically oriented, especially backed by Russia’s sale of its huge oil reserves. From this, Moscow has the ability to increase its foreign assets, reduce its national debt and even cut its interest rates in order to stabilize its exchange rate when compared to the PPP.

Reference List

Aleksashenko S. (2017). Sergey Aleksashenko: “There Is No Raw Materials Dependency” – Institute of Modern Russia. Retrieved from https://imrussia.org/en/analysis/economy/2759-sergey-aleksashenko-%E2%80%9Cthere-is-no-raw-materials-dependency%E2%80%9D

Appleby, D. (2017). The Ruble Recovery: The Sky Is the Limit or Troubles Ahead? – The Market Mogul. Retrieved from http://themarketmogul.com/ruble-recovery/

Kuznetsov, V. (2017). No Ruble Tripwire Seen for Russia as Currency Strains Mount – Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2017-01-17/no-ruble-tripwire-seen-for-russia-as-currency-strains-feed-angst

OANDA. (2017). Historical Currency Converter; OANDA Solutions for Business: USD/RUB. Retrieved on April 7, 2017 from https://www.oanda.com/fx-for-business/historical-rates

 

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