What is USD/RUB?
The USD/RUB currency pair represents the exchange rate between the US dollar and the Russian ruble, or the number of rubles (the quote currency) required to purchase one US dollar (the base currency).
The United States dollar is the most widely traded currency in the world and is held by the majority of central banks and financial institutions. It is used as legal tender in a number of countries, including El Salvador and Zimbabwe. Due to its dependability and stability, the dollar is the currency of choice for international transactions and reserves.
The ruble has been used in Russian territory since the 14th century, making it the second-oldest currency still in use after the pound sterling. It is administered by the Central Bank of the Russian Federation (commonly referred to as the Bank of Russia) and is used in Russia as well as the occupied portions of Ukraine and Georgia.
The USD/RUB pair is one of the most closely watched currency pairs, as it reflects the economic and political dynamics between the United States and Russia, reflecting their divergent ideologies and geopolitical interests.
What affects the price of the USD/RUB pair?
Numerous factors affect the USD/RUB exchange rate, including geopolitical tensions, economic sanctions, trade balances, and crude price volatility.
Geopolitical tensions can cause tremors in the currency markets. Involvement in conflicts, such as the conflict with Ukraine, has a direct effect on the value of the rouble. During periods of uncertainty, investors gravitate towards safe-haven currencies such as the US dollar. This increased USD demand can increase the USD's value relative to the RUB, resulting in a higher USD/RUB exchange rate. For instance, the conflict in Ukraine at the beginning of 2022 prompted Western nations to impose economic sanctions on Russia, thereby exerting pressure on the USD/RUB exchange rate.
Economic sanctions, such as those imposed on Russia at the beginning of 2022, can have a devastating effect on the rouble's value because they restrict Russia's access to global financial markets and commerce, thereby reducing foreign investment and economic activity. As a consequence, the value of the rouble may be subjected to intense pressure, further affecting the USD/RUB exchange rate and its volatility.
The trade relationship between Russia and the United States has a direct effect on the value of their respective currencies. Major US exports to Russia, such as automobiles and gas turbines, can impact the demand for dollars, thereby influencing the USD/RUB exchange rate. Similarly, Russia's primary exports to the United States, such as refined and crude petroleum, influence the currency dynamics between the two nations. As a result, the pair is highly sensitive to fluctuations in crude oil prices, as the Russian economy is highly dependent on the petroleum market.
The Russian economy is closely tied to the petroleum market, as a significant portion of its exports and government revenue come from oil and gas. Fluctuations in global oil prices can directly impact Russia's economic performance and its currency. When oil prices are high, Russia's export earnings increase, which can support the rouble. In contrast, a decline in crude prices can weaken the rouble and contribute to USD/RUB exchange rate volatility. Price limits on Russian oil, such as those imposed by the G7 in 2022 at $60, led to a decline in exports and contributed to fluctuations in the exchange rate.
Russia typically uses its oil and gas revenue surplus to purchase foreign currencies and build up its foreign exchange reserves. During periods of market stress, these reserves can be used to stabilise the rouble. However, if a significant portion of these reserves have been frozen as a result of economic sanctions, as has been the case in recent years, Russia's ability to support its currency becomes more difficult.
What to watch out for when trading USD/RUB?
Economic data releases such as GDP growth, employment statistics, inflation, and the US and Russia's trade balances should be monitored by USD/RUB traders. Observe announcements from influential organisations in both nations. These consist of:
- U.S. Federal Reserve and Bank of Russia announcements for interest rates and shifts in monetary policy.
- US economic data (GDP, inflation, employment, manufacturing/services PMI, consumer sentiment)
- Federal State Statistics Service of Russia for data on trade balance, unemployment rate, Consumer Price Index (CPI), and Gross Domestic Product (GDP)
- Oil-related market events (OPEC meetings, oil inventory data)