Russian ruble (USD/RUB) faces moment of reckoning

on Feb 17, 2023
  • The USD/RUB exchange rate has been in a strong bullish trend lately.
  • Natural gas prices have continued plunging in the past few months.
  • Fed hawks point to a 50 basis point hike in March.

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The USD/RUB price continued its comeback after several Fed officials turned extremely hawkish following the strong US economic numbers. It also rebounded as natural gas prices crashed to the lowest point since 2021. It was trading at 74.10, the highest level since April last year.

Natural gas prices plunge

The Russian ruble plunged hard in 2022 as Russia flexed its muscle in the energy sector. It did that by ordering all European gas shipments to be handled in ruble. Also, the Vladimir Putin’s admnistration ordered its companies to stop shipments to Europe. As a result, prices surged to a record high.

The strategy backfired spectacularly. For one, natural gas price has plunged by over 60% from the all-time high. It has also moved to the lowest level before the Russia’s invasion of Ukraine. This happened as more countries like the UAE and United States increased their liquified natural gas (LNG) shipments to Europe. 

Russia, on the other hand, is struggling to replace Europe as its key gas market. Before the invasion, Russia used to sell most of its gas to Europe. It will therefore take more time for the country to completely replace the bloc. 

The USD/RUB price has also risen as the prices of other commodities sink. In this article, I wrote that platinum prices had nosedived. Similarly, other commodities that Russia exports like palladium and copper have seen their prices plunge.

Meanwhile, the USD to RUB price has risen as more Fed officials point to more hikes. In statements on Thursday, Loretta Mester and James Bullard said that they supported a 50 basis point hike in the upcoming meeting. Their views came after the US published strong inflation and retail sales numbers. Bullard said:

“My overall judgment is it will be a long battle against inflation, and we’ll probably have to continue to show inflation-fighting resolve as we go through 2023.”

USD/RUB outlook


USD/RUB chart by TradingView

The USD/RUB has clearly jumped slowly from last year’s low of about 50 to the current 74. It is now sitting at an important resistance, which was the highest point on December 30th. 

The pair has moved above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved close to the overbought level. Therefore, the pair will likely continue rising as buyers target the key resistance point at 80.