US Dollar vs Ruble

The US is waging economic war against Russia, and a real war was narrowly avoided as the US was careful not to strike Russian installations in Syria in the most recent strike.  On 12th April 2018 the US together with France and the UK shot 105 missiles against Syria as a warning to the Syrian government for allegedly using chemical weapons. The American Ambassador to the UN Nikki Haley has made it clear that the warning should be extended to Russia and Iran.

The US has recently imposed more sanctions on Russia, and the sanctions have caused damage, however, as an examination of the USD/RUB exchange rate demonstrates. The US dollar strengthened significantly against the Russian ruble, jumping from 57.6325 on 6th April 2018 to 62.9158 on 11th April 2018. The USD/EUR showed a similar but much more contained reaction, going from 0.8085 to 0.8123 only to fall back to 0.8086 a few days later. That was not so with the ruble, which closed at 61.57137 on 18th April. US rhetoric and sanctions effectively weakened the Russia currency on the market.

The Russian economy has suffered because of American economic aggression. There are interesting investment opportunities in Russia as stocks there can produce dividends. It should be reasonable to acquire rubles, and this Newsletter has advocated buying rubles and renminbi. American aggression has had its effect and it should be noted that American military forces have occupied most of the territory of eastern Syria in order to exploit the natural resources there. Follow the money.

As for the renminbi it has appreciated against the greenback, going from 6.90 to 6.30 over the last year. Going long on yuan would have had very good results whereas the ruble was more or less holding steady until the recent sanctions, which rewarded shorting the ruble. Informed American traders probably did so.

What all this means for traders is that one should pay attention to the sanctions imposed by the West as they can result in price changes in Forex. This Newsletter has endorsed the view that the US dollar is doomed to decline as the Chinese attack on the petrodollar gathers momentum and as the EM GDP continues to increase. It is not to be excluded that China devalues the renminbi in order to remain competitive in international markets. What is to be expected is that Russia will take measures to free itself as much as possible from US sanctions by avoiding dollar transactions and concentrating on trade with Belt and Road countries while continuing to sell oil and gas to Europe despite American interference. Traders will have to be wary.

Walter Snyder


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