The end of 2014 was a remarkable period of time in terms of the direction of the value of sovereign currencies of some of the most important global regions.
Russia’s ruble liquidity shortages in December, whilst causing some retail FX firms to temporarily suspend the trading of ruble pairs, did little to harm Russia’s FX industry which gained its full regulatory parameters at approximately the same time, with trading volumes of domestic FX firms remaining high.
In the United States, the dollar rose substantially, and is continuing to do so against many majors, the euro and yen being the most notable, whereas in Europe, today’s decision by the European Court of Justice that the bond-buying program which encompasses European Central Bank’s Outright Monetary Transactions (OMT) program, is legal and can be upheld. This sent the euro plummeting to a nine-year low today, in light of the possibility that Greece may drop out of the European Union as a result.
Today, EXNESS has made a remarkable prediction that although the dollar is currently in pole position, it may drop significantly against the ruble in the year ahead.
Commenting on USD/RUB expectations for this year, Sergey Kochergin, Senior Analyst at EXNESS said: “The drop of Brent Crude oil prices to 50 USD per barrel will likely lead to the dollar growing to 64 rubles in the short term. Moreover, S&P’s lowering of its rating for the Russian Federation to below “BBB-” in January may provoke a massive sell-off of Russian assets.”
Mr. Kochergin continued to explain that “In Q1 2015 we expect oil prices to fall to 40 USD per barrel and then rebound upward sharply, just as happened at the beginning of 2009. On the other hand, the Russian Federation’s massive gold reserves and stabilisation funds, and major Russian companies’ foreign currency earnings will allow the Russian Federation and Russian banks and corporations to survive 2015, in which time they will repay external debts amounting to 130 billion USD” he continued.
“According to the Central Bank of the Russian Federation, in 2015 the rouble will grow stronger under virtually any influences. In our view, the USD/RUB exchange rate is overstated by roughly 12-17 rubles. In other words, over the course of 2015 the US dollar may return to the range of 45-50 roubles” is Mr. Kochergin’s conclusion.
Indeed, it is clear that nations which are rich in high-demand commodities are clearly in a good position to make the connection between strength of domestic currency and the requirement by overseas entities to purchase them in such currencies, a dynamic that many FX firms have been following recently by not only adding ruble pairs to their list of instruments despite the liquidity issues, but also adding commodities including brent crude to spot platforms.