Will the Ruble Revive?

Business people tend to be a conservative lot. There is trouble with Russia and business folks are heading for the exits. Our question is, will the Ruble revive? Here is a little background information. We noted recently that Russia is selling dollars because of a weak Ruble. The Ruble has been in trouble because the Russian Federation annexed part of a neighboring country, Crimea which was part of Ukraine. The European Union and the USA are applying selective sanctions on those in the inner circle of President Putin. More importantly, business people are pulling their money out of Russia and rethinking their investments. When these folks sell Rubles for dollars and Euros they drive down the value of the Ruble. Russia has countered by purchasing Rubles with their dollar reserves but Russia’s dollar reserves are not that great and the Ruble has suffered. In recent days President Putin has asked separatists in the Eastern Ukraine to back off of their demands for votes on succession. He has also announced that he is moving 40,000 Russian troops back from the border. Will the Ruble revive in response to these recent measures?

Forecasting Supply and Demand

Fundamental analysis of currency pairs such as the USD/RUB or EUR/RUB is really a matter of deciding the flow of value in and out of Ruble holdings. If the oil and natural gas producers such as Gazprom demand payment for their products in Rubles it will drive up the price as buyers will need to purchase Rubles with their dollars, Euros and other currencies. Will the Ruble revive? It will if Russia does not mess up their contracts with buyers of gas and oil and takes payment in Rubles. Will the Ruble revive? It will if Mr. Putin follows through and pressures separatists in Ukraine to back down and really does move his own troops away from the border with Ukraine.

What Are Your Options?

Forex options are a good way to trade when a Forex pair is volatile. The first value of trading options on one currency with another is that the trader limits his potential losses to the cost of an options contract. The second is that buying options gives the trader leverage of his trading capital. Here is an example of what might happen. Let us assume that things in Eastern Ukraine settle down. Russian troops do, in fact, back off from the border. Separatists back off and Ukraine holds their first general election after ousting their previous, very corrupt, president. And let us assume that oil and gas supplies moving in pipelines from Russia across Ukraine continue. Will the Ruble revive? It likely will. The Ruble is currently trading at 35 to a dollar but the rate in more tranquil times was 31 to a dollar. If things settle down we might well expect the Ruble to climb back in value to the 31 to a dollar range. If one were to buy RUB with the USD today that could result in a thirteen percent profit providing that the Ruble revived and return to its previous level. But, if a trader paid a substantially lesser amount for a call on Rubles with dollars the return on investment could be significantly more. Some of the best Forex trading opportunities occur when times are uncertain. Think of the blood in the streets admonition for stock trading. That admonition may truly apply in this case. Will the Ruble revive? Perhaps, and if you trade intelligently you might just make money. In the meantime always do your own homework and do not be afraid to sit out a trade that you do not understand.