How Positive U.S.-Russia Relations will Affect the Dollar and Ruble
One of the things many political analysts are finding most interesting about Trump in both his campaign and his presidency so far is his seeming keenness to form good relationships with Vladimir Putin and Russia. A positive relationship between the two nations is new territory for both parties, however, it is clear to see that there could be significant benefits for both countries, as well as removing some of the global tension that always exists when major powers are seen to have distrust.
But if the ‘romance’ between the two leaders continues, how will this affect the currencies of Russia and the United States, and will one side fare better than the other?
The ruble was heavily touted as a currency to watch coming into 2017. It was trading well in 2016, with averages between 60.00 and 61.00, with prices as high as 81.00 in the early part of the year. It technically outperformed most other major currencies, and once Trump won the election and was inaugurated, analysts seemed sure that this could only mean good things for the Russian currency.
The ruble is usually traded in pairs with either the dollar or the euro and these are both currencies that have seen quite a lot of volatility due to things like Brexit and the Italian referendum last year in Europe, and of course the result of the election in the US. This continues to affect international money transfers and has enabled the ruble to, at times, be very strong against these currencies in 2016 and the early part of 2017. It is certainly a currency that investors are beginning to look at more and more.
Of course, the ruble may well stand to benefit as better and better relationships with America develop under Trump, but Trump isn’t giving anything away for free. Some recent moves he has made such as hiring Fiona Hill (who is a well-known critic of Putin and has even written a book framing him in a negative light, as the White House’s senior director for Russia and Europe) have questioned whether he might be changing his mind about the whole thing. In fact, what is more likely is that moves like this are an effort to quell any speculation about intrigue between the two nations, and also to put Trump in a stronger negotiating position with Putin. He did, after all, say in his often quoted book, The Art of The Deal, that to come out best in a negotiation you should never allow your negotiating partner to know you really want the deal.
Undoubtedly the dollar would see some strengthening from good deals with Russia and a strong relationship, however, the ruble would probably experience the best of this, given that the dollar is already a major currency and therefore traded with just about everything and subject to far more economic factors, whereas in the case of the ruble, this isn’t currently the case.
The USDRUB pair is one that forex traders will certainly be watching with interest as Putin and Trump continue their dance, and interest in the EURRUB pair may also rise as the ruble strengthens.