How Long Will the Ruble Recovery Last?

The Russian ruble is gaining as the price of crude oil edges higher. From the Forex point of view how long will the Ruble recovery last? The price of crude oil, the actions of the U.S. Federal Reserve and monetary policy in Russia will all affect the price of the ruble. According to Bloomberg Business the recent impressive rise of the ruble is testing bank of Russia limits.

The ruble’s world-beating gains may soon come to an abrupt end, according to the biggest foreign-exchange trader globally.

Citigroup Inc. says the odds are rising that the Bank of Russia starts buying dollars for the first time in almost a year if the ruble climbs to 60 against the greenback, compared with 67.822 on Monday, the strongest level this year. The currency will extend its appreciation into the low 60s, Citigroup said.

The ruble has been the Forex world’s best performer in the last month appreciating 11%. One issue for the Russian government is that a cheaper ruble makes oil revenues denominated in dollars go father in paying the bills. The Russian central bank will be replenishing dollar reserves in order to slow the rise of the ruble, seen perhaps as too much of a good thing. How long will the ruble recovery last? The Russians are probably going to aim for the low 60’s in selling rubles for the dollar. How about the Fed and oil prices?

U. S. Federal Reserve

When the U.S Federal Reserve raises interest rates the US dollar rises and other currencies such as the ruble fall. The recent decision by the Fed to hold interest rates at their current level has driven the dollar lower versus other currencies. Reuters reports that although rates are unchanged the Fed has left the door open for a June hike.

U.S. Federal Reserve policymakers are seen leaving short-term interest rates unchanged at a two-day policy meeting that began Tuesday, but also to signal that a rate hike is not too far off as long as the job market and inflation continue to improve.

The U.S. central bank lifted borrowing costs in December for the first time in nearly a decade, but uncertainty over the impact on the U.S. economy of slower growth in China and Europe since the beginning of the year has driven policymakers to hold off on any further rate hikes since then.

A recent string of stronger U.S. data, including faster-than-expected job growth in February, has eased fears in the past few weeks that headwinds from abroad, and the tighter financial conditions they sparked at home, could derail the recovery.

As such it is a good bet that the Fed will raise rates a bit in June raising the dollar and putting a dent in any continued ruble recovery.

The Price of Crude Oil

As oil goes up so does the ruble and oil prices are rising. Why is this and how long will it last? Money Morning asks why the West Texas Intermediate crude oil price is climbing.

The factor boosting the WTI crude oil price today is the bullish sentiment toward next month’s OPEC and non-OPEC meeting.

The meeting is set for April 17 and will feature more than a dozen OPEC and non-OPEC countries. The nations, which include Saudi Arabia and Russia, will try to agree on a collective output to stabilize prices and alleviate each country’s oil-reliant economies.

It remains to be seen if OPEC and non-OPEC nations can get together to decrease production and cause a genuine rise in oil prices. Usually when one cuts back on production others jump in to take their business. With the global economy in the doldrums and China’s economy putting on the brakes there is no likelihood of a huge rise in oil prices. And to the degree that there is U.S. fracking operators will resume exploration and drive prices down again. So, how long will the ruble recovery last? We don’t think it has much father to go.