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America’s relationship with Russia and the former Soviet Union is a strained one, but there’s no reason for currency speculators to hold back when it comes to opportunities in the Russian Federation. The two countries’ position as long-time political adversaries, creates the kind of market conflict that can lead to big gains for sharp Forex speculators. USD/RUB has the potential to be a solid short-term investment with large yields. The key to successful investment in the rouble is to be aware of the political situation, watch Russian consumer confidence for signs of weakening, and be patient as the dollar recovers strength as the American market heats up and interest rates begin to rise.

USDRUB technical chart US dollar Russian Rouble October 2014

Russia and the Rouble Share A Volatile History

One reason that many American Forex investors have been slow to look at the rouble in the same way that they have approached the Japanese yen is because of Russia’s historic volatility. Russia is a country of extremes, and the political climate there has interfered with the markets on more than one occasion. Still, Russia is a large economy with massive energy holdings and an optimistic consumer base which is just as hungry as China for Western goods.

The rouble has a tendency to suffer from Russia’s political decisions, but presently the country’s mood is excellent and the rouble is performing well. The real opportunity for overseas investors will only show itself once the rouble begins to inflate and destabilize, a trend that many observers are saying could happen in early 2015. Anyone who is interested in the currency markets would do well to keep their eyes on the Russian economy, and watch for corrections in the price of the rouble.

Strengthening Dollar, Weakening Rouble Present an Opportunity

Right now, the rouble is at a multi-year high due to Russian consumer confidence and a booming energy sector. However, traders who take into account the historic volatility of the Russian economy and the country’s current risky position in foreign affairs can see that the rouble isn’t on firm footing. America and Russia have taken opposing sides in a series of conflicts, so a changing worldwide political climate is likely to have clear winners and losers when it comes to the two countries’ interests abroad.

On the other side of the equation, the dollar is currently weaker than many Forex analysts believe it should be. The reason behind this is the Fed’s artificially low interest rates, coupled with sluggish economic growth and a consumer sector that is still finding its footing in the wake of the latest economic downturn. Still, the American economy is large and resilient, and as interest rates rise the dollar is poised to gain ground.

Forex investors should look for a mixture of a strengthening dollar and Russian economic issues that come from reckless foreign policy before they pounce. Conversely, if the Russian economy remains strong while the dollar continues to be artificially weakened by Fed policy, an investment in roubles would be too risky to recommend. However it plays out, Forex currency speculators should all have their eyes on Russia, searching for an opportunity to take advantage of the country’s volatility.

Prepared by IG Australia


 This information has been prepared by IG Markets Limited.  ABN 84 099 019 851, AFSL 220440. We provide an execution-only service. The material on this page does not contain (and should not be construed as containing) personal financial or investment advice or other recommendations, or an offer of, or solicitation for, a transaction in any financial instrument, or a record of our trading prices. No representation or warranty is given as to the accuracy or completeness of the information. Consequently any person acting on it does so entirely at his or her own risk. The information provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who view it. IG accepts no responsibility for any use that may be made of the comments and for any consequences that result.