Trading the Ruble if Russia Invades Ukraine

The game of chicken that Russia is playing in Eastern and Southern Ukraine could get out of hand. Out concern in the Forex markets is trading the Ruble if Russia invades Ukraine in full force. Russian President Putin was quoted as saying that he could be in Kiev in two weeks. If worse comes to worse what will happen to the Ruble in Forex trading? Months ago we speculated about what would be the Forex response to violence in Ukraine. At that time a Ruble was worth three cents. Today it is worth 2.6 cents, a fall of over ten percent versus the US dollar. Western sanctions have hurt Russia but have also taken a bite out of German profits as well. What sort of profits could traders have gained if they had anticipated the recent fall of the Ruble?

Trading the Ruble with Leverage

A common approach to trading currencies is to use a margin account. The trader puts in $10,000 but can trade $1,000,000 worth of a given currency with 1:100 leverage. As an example in trading the Ruble with 1:100 leverage and using $10,000 in a margin account one could have purchased $1,000,000 with Rubles at the beginning of the year. Today that $1,000,000 could be traded back into Rubles for a more than ten percent gain or more than $100,000. This would have been a ten-fold profit in trading the Ruble as it fell over the last few months.

Trading the Ruble if Things Get Worse

Russia, or more specifically Vladimir Putin, does not seem to be interested in backing off on his demands for autonomy for the Russian speakers in Eastern and Southern Ukraine. He annexed Crimea some months ago and is integrating that former Ukrainian state into the Russian Federation. As Ukraine has made gains against separatists in the East Russia has sent troops and arms to directly aid rebels. The USA and European allies have specifically ruled out a military solution in Ukraine but are ready to beef up their forces if Russia becomes hungry for more land in other adjacent states. The Cold War may well be back. How will it be trading the Ruble if Russia advances farther into Ukraine or threatens others of their neighbors? We noted recently that Russia is selling dollar reserves because of a weakening Ruble. There is only so far that Russia can go in this regard. Will the Ruble plummet? Anyone who has made money by selling Rubles for dollars may be hesitant to buy back into the Russian currency if a full-fledged war breaks out in Ukraine.

Keep Your Trades Short

Trading the Ruble does not mean that you need to hold Rubles long term and, in fact, if things go from bad to worse you do not want to. But one can scalp for profits or trade short term trends as events in the region drive the relative value of the Ruble up and down. There a numerous Forex trading tactics that can be applied to making money trading the Ruble in the current situation. As always do not trade what you do not understand as no one ever lost any money by not trading.