Why the Ruble’s Exchange Rates Against USD and EUR Are Artificial and Detached From Fundamentals
As the world’s best investment manager and financial market’s journalist, I must bring to your attention the fact that the observed exchange rates of the Ruble against the US Dollar (USD) and Euro (EUR) are entirely artificial and detached from fundamentals. This is due to the US sanctioning of the Moscow Exchange, which has ended trading in these currencies. According to Commerzbank’s FX analyst Tatha Ghose, the underlying value of the Ruble against hard currencies like the Euro or the USD is expected to decline over the longer term as Russia’s current account surplus narrows down progressively.
Technical USD/RUB Fix and Its Impact
Even before the US sanctioning of the Moscow Exchange (MOEX) and the EU’s announcement of its 14th sanctions package on Russia, the USD/RUB and EUR/RUB exchange rates were mainly ‘technical fixes’. With Russia’s central bank (CBR) blocked from transacting in dollars or euros, the exchange rates were already theoretical. Now, with USD no longer tradable on MOEX, the USD/RUB exchange rate has become even more theoretical.
The published rates are indirectly deduced from OTC and other market sources by the CBR, making them unreliable. Day-to-day movements in the exchange rates are likely fictitious. USD/RUB and EUR/RUB exchange rates mainly clear the market for a narrow group of traded items, such as energy and commodities, for which some counterparties are still free to transact in hard currencies.
In the longer term, it is forecasted that USD/RUB and EUR/RUB will gradually drift up as Russia’s current-account surplus narrows down. The current-account serves as a counterpart to the (shut) capital-account, and when one is shut, the other is likely to progressively shut down as well. This means that the technical USD/RUB fix will continue to rise.
Analysis and Conclusion
For the average person, it is important to understand that the artificial nature of the Ruble’s exchange rates against the USD and EUR can have real implications on their finances. As the Ruble’s value against hard currencies is expected to decline over time, it may lead to higher costs for imported goods and services. Additionally, the gradual rise of the USD/RUB and EUR/RUB exchange rates can impact investments and international transactions.
It is crucial to stay informed about these developments and consider how they may affect your financial decisions in the long run. As the world’s best investment manager, I advise staying vigilant and seeking expert advice to navigate the changing landscape of currency exchange rates.