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USD/RUB Exhibits High Volatility, Ending 5 Day Descent

USD/RUB Exhibits High Volatility, Ending 5 Day Descent

2014-11-25 18:41:00
Walker England, Kara Dailey,
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Talking Points:

  • Ruble’s five day gain against the US dollar comes to a close
  • Volatility in commodity prices is the likely source of present ruble instability
  • USDRUB bounces off support after a 5 day 289 pip decline

With the effects from China’s unexpected rate cut fading, commodity prices have again collapsed with US oil opening today at 75.68. Closely tied to the price of oil, the Ruble too has lost ground after spending five days appreciating against the US dollar.

Friday the People’s Bank of China surprised the market with their first rate cut in two years. As the rate was lowered by 25 basis points to 2.75%, the price for US Oil found a reprieve rising from a low of 74.19 on Thursday to a high of 76.23 on Friday. However, the result was fleeting, as traditional monetary policy in China tends to be overshadowed by capital controls and the use of non-traditional instruments. Consequently, oil has since traded lower for two consecutive days and is likely to continue seeing volatility ahead of Thursday’s OPEC meeting in Vienna.

Accounting for 28% of GDP, the energy sector serves as the Russian Federations main driver of economic growth. Therefore instability in oil prices has led the Ruble to exhibit volatility, appreciating to 44.325 over five days only to retrace 39.82% in one, sending the 10Y bond yield up 6 basis points to 10.25%. The Ruble Overnight Index Average was also raised from the October 1st low of 7.90 to 10.66 on Monday. In response, the Finance Ministry must determine whether to hold additional bond auctions this week in an effort to smooth such variation.

USD/RUB Daily Chart

dailyfx usdrub dailychart.

Chart Created by Walker England Using MarketScope2.0

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