USD/RUB: ruble strength accelerates after hawkish CBR decision

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his wife, son,… read more.
on Jun 11, 2021
  • The USD/RUB declined to a two-month low after the hawkish Russian Central Bank decision.
  • The bank hiked interest rates for the second straight month.
  • It also upgraded the outlook for the Russian economy.

The Russian ruble (USD/RUB) soared to the highest level since July 2020 after the Central Bank of Russia (CBR) interest rate decision. The pair trading at 71.66, which is 8.8% below the highest level in April.

USD/RUB
USD/RUB chart

Russia Central Bank decision

The CBR concluded its two-day monetary policy meeting on Friday and decided to hike interest rates for the second consecutive month. The bank hiked interest rates from 5% to 5.5% in line with median estimate by analysts. The 50 basis points increase was lower than the 75 basis points that analysts at Goldman Sachs were expecting.

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The decision came at an important time for the Russian economy. Crude oil prices have soared, which is a good thing since the country is the third-biggest producer after the United States and Saudi Arabia. The country’s inflation has also risen to 6.15% as food prices soared. In its statement, the bank said:

“Economic activity is recovering faster than expected by the Bank of Russia. High-frequency indicators point to steady growth of consumer and investment demand. According to the Bank of Russia’s estimates, consumer activity has generally reached its pre-pandemic levels.”

Also, the decision came ahead of an important meeting between Vladimir Putin and Joe Biden. Biden will pressure Putin on several issues like human rights and the jailed opposition leader. Putin will also pressure the president on the recent sanctions. 

The USD/RUB is also reacting to the recent inflation data from the United States. According to the Bureau of Labour Statistics (BLS), the headline consumer price index (CPI) rose to a 2008-high of 5% while core CPI rose by 3.8% in May. These numbers are important because they tend to have an impact on the Fed’s monetary policy.

USD/RUB technical analysis

USD/RUB
USD/RUB technical chart

The daily chart shows that the USD/RUB pair has been in a freefall in the past few weeks. This has seen it fall by more than 8% in the past two months. It has also dropped below the important support at 72.65, which was the lowest level in December and March. It has also dropped below the 25-day and 50-day exponential moving averages and the Ichimoku cloud. Therefore, the pair will keep falling as bears target the next support at 71.00.

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