USD/RUB: Here’s why the Russian ruble has staged a strong comeback

The USD/RUB pair has been in a strong bearish trend as the Russian ruble has staged a strong comeback against the US dollar. The pair tumbled to a low of 75.66 on Friday morning as investors watched the new decree by President Putin. The ruble has risen by more than 45% from its lowest level this year when the war in Ukraine ended.

Why the Russian ruble has jumped

The Russian ruble has become one of the best-performing currencies in the past few weeks as the market reflects on the actions by the government and the central bank.

Facing substantial sanctions, the central bank raised interest rates sharply in a bid to make savings by Russians attractive. The headline rate currently stands at more than 20%.

At the same time, the bank ordered limits to capital flight by limiting the funds that Russians could send abroad. 

The biggest catalyst for the strong Russian ruble comeback has been the decree by President Putin to force countries to buy its natural gas using the currency.

The decree was aimed at all unfriendly countries, which include those in the European Union. While the EU has insisted that payments will be done in euros, it is unclear how this will happen. 

This decision was bullish for the Russian ruble for a simple reason. It will increase its demand since foreigners will need to first buy the ruble with their currencies to execute their trades.

Notably, Russia has leverage when it comes to the energy and other commodities market. For example, it is the biggest oil exporter in the world and countries like Germany are fully dependent on it. It is also a leading exporter of other commodities like wheat and palladium.

USD/RUB forecast

The USD/RUB pair has performed as I predicted two weeks ago. At the time, I warned that the pair would decline sharply after the initial ruble sell-off. Now, it has moved below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved close to the oversold level.

Therefore, there is a likelihood that the pair will keep falling as investors reflect on the new order by Putin on gas shipments. The next key level to watch will be at 70.