Where do the Ruble and Russian Stock markets go?

Author: Ahura Chalki

Wednesday, 17 August 2022 Number of words: 450 Study time: 3 Minutes Views: 430

Ruble analysis

Oil prices are falling, and one frequently asked question is about the Russian Ruble and stock markets. 

Russian Economy is suffering from "Dutch Disease."

Russian Economy directly depends on the exploitation and export of crude oil and Gas. Russian Economy is suffering from "Dutch Disease." The Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector and a decline in other sectors, which for the Russian economy is the Oil and Energy sector overall. So now, while the Oil price is falling, again, this question comes to mind how will it affect the Ruble rate? Economists at ING Bank estimate that rate of the Ruble with the dollar will be 60 by the end of the third quarter.

The Russian Ruble is trading at around 60 per USD, well supported by the government`s strict capital controls and trade imbalances. After the Russia-Ukraine war, Ruble tested its historic low against the USD, a bit above 120 Ruble.

With fast rate hikes in line with a substantial increase in commodities prices, the government managed to control the crisis and support the currency rate. In addition, monetary authorities mandated hefty fees and negative interest rates on currencies from countries called "unfriendly." These policies and commodities prices, especially Gas prices, ended with substantial increases and development in the country`s trade balance. Russian current account touched a record of USD 70.1 billion in Q2, up from USD 17.3 billion in the corresponding period of the previous year. 

We also see an excellent trade balance with the current situation and prices in the second quarter. However, later this year, when European sanctions kick in, it can bring the Ruble back on a depreciation track in the last quarter. 

"Economy ministry forecasts seen by Reuters suggest Russia`s economy is dealing with sanctions better than initially feared and will contract less than expected." As a reaction, we expect to see the Russian markets gradually ease. Still, it does not mean we will have an excellent economy or developing financial systems there. 

Brent crude oil, a global benchmark as one of Russia`s main export, hit a six-month low on Tuesday, spurring volatility in Russian stocks. However, Gas prices continued to increase above $9.65. Gas prices in Europe are even higher, which is the leading Russian market. 

The gas price helped the dollar-denominated RTS index (the 50 most popular Russian stocks) to increase 0.9% to 1,1466.8 points after a decrease in the first trading hours.

From the technical point of view, USD RUB is back above 20 DMA and, with stochastic at 60, remains bullish in the daily chart. Following resistance levels sitting at 63.40, 67.00, and 71.00, respectively. Conversely, breaching under 60 can put the 54 in the spotlight mid-term. 

Source: IFC Markets
Tags: USD Ruble
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