Russia forex volumes have been strong this year – will this latest move lead to more volatility?

One of the fastest growing FX markets of 2013 has certainly been Russia, leading to one month after another of record forex trading volumes for Russia FX market leader Alpari. (LeapRate estimates that Alpari has an approximate 40% market share of the Russia retail FX sector).

Interestingly, this growth has occurred despite the Ruble seeing very little volatility versus the USD or the EUR. The Ruble has traded in a very tight band of RUB 30-33 to the USD over the past two years (see chart below) as The Bank of Russia, Russia’s central bank, has maintained a very interventionist policy when it comes to minimizing volatility in the Ruble.

That is, until now.

The Bank of Russia released a brief statement indicating that the band in which it will allow the Ruble to trade versus both the USD and EUR, before intervening, will be more than TRIPLED, from 1 Ruble to 3.1 Rubles. The change in policy is part of a greater plan to have the Ruble fully float by 2015.

What can this mean for the retail forex world? Well, a lot. Similar to what we’ve seen in China, a greater trading band will likely mean more volatility. And as we all know in the world of forex, more volatility equals greater trading volumes.

USDRUB chart, past year. Source: XE.com.

For the complete Bank of Russia press release click here.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.