The USD/RUB exchange rate held steady this week as Russia hosts the BRICS Summit and as traders focus on the next Central Bank of Russia (CBR) interest rate decision. The pair was trading at 96.80, a few points below the year-to-date high of 98.46. It has risen by over 17% from its lowest point this year.
The GBP/RUB pair was trading at 125.75, while the EUR/RUB was at 104.73.
BRICS Summit
The BRICS Summit in Russia will likely be a catalyst for the Russian rouble this week. This important group is made up of some of the biggest players in emerging market countries like Brazil, India, and China. It has since expanded to include other countries like Ethiopia, Egypt, Iran, and the United Arab Emirates.
The group comprises diverse countries, some that don’t like each other. For example, China and India see themselves as the biggest competitors. Most recently, many companies with operations in China have shifted their base to India as tensions with Western countries have risen.
Ethiopia and Egypt are in a big conflict because of a large dam that Egypt has built, which could block water from the River Nile for a while. Saudi Arabia and Iran are also not friends.
Still, the group is mostly held together by an anti-west rhetoric, and the need to shift from the United States dollar to another currency. For example, Saudi Arabia has started planning to sell crude oil only using its national currency.
The USD/RUB will react to the meeting as Russia shows off the progress it has made in the past few years when Western countries have implemented large sanctions following its invasion of Ukraine.
Read more: “It’s embarrassing” – Analyst blasts the proposed BRICS currency
Bank of Russia’s decision
The other notable catalyst for the USD/RUB pair will be the interest rate decision by the Bank of Russia on Friday.
The BoR has embraced a different tone than other central banks globally. While most of them are slashing interest rates, it has continued hiking. It has already hiked rates two times this year, moving them from 16% to 19%.
Analysts expect the bank will continue hiking, moving them from 19% to 20% as it continues to battle the elevated inflation levels in the country.
The most recent data shows that the headline Consumer Price Index (CPI) rose from 2.3% in 2023 to 8.6% last month. This increase was higher than the expected 8.5%.
Interest rate hikes help to lower inflation by reducing the amount of spending by residents. It also makes investing in the local currency more attractive since Russians can now gain up to 20% by just buying bonds.
The rate hike is also a sign that the Russian economy was doing well as the unemployment rate has dropped to 2.4% from the pandemic high of almost 6%.
This growth is happening because of the ongoing war in Ukraine, which has led to substantial spending by the government. Industrial and manufacturing production numbers have done well in the past few months.
Strong US dollar
The USD/RUB exchange rate has also soared because of the strength of the US dollar as the Fed considers the next key actions. The US dollar index (DXY) has risen from the year-to-date low of $100 to $104.
This rebound happened after the US published a series of upbeat economic numbers. For example, the unemployment rate has dropped to 4.1%, while inflation is still above the 2% target point.
More data showed that retail sales held steady last month, meaning that consumer spending is doing well.
Therefore, analysts expect that the Federal Reserve will slow the pace of interest rate hikes in the coming weeks.
Meanwhile, the USD/RUB has also jumped because of the tumbling crude oil prices. Brent, the global benchmark, has dropped to $73.98 from the October 7 high of $81.12. Similarly, the West Texas Intermediate (WTI) fell to $69.
The Russian ruble reacts to the actions in the crude oil market because it is the third biggest producer after the United States and Saudi Arabia.
USD/RUB technical analysis
USD/RUB chart by TradingView
The USD to RUB exchange rate has been in a slow uptrend in the past few months, moving from a low of 82.41 on June 18 to 96 today.
It has moved above the important resistance point at 95.47, its highest point on February 26. Also, the pair has formed a golden cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other.
The Relative Strength Index (RSI) and the MACD indicators have pointed upwards in the past few weeks. It has also formed an inverse head and shoulders chart pattern.
Therefore, the pair will likely continue rising as bulls target the key resistance point at 100. This view will be confirmed if it rises above the key resistance point at 98.46.
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