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The strong Russian ruble comeback has faded as the US dollar index rally gains steam. The USD/RUB pair was trading at 94.46, a few points above this week’s low of 91.40. It has jumped by more than 40% this year.
Russian economic woes
The USD/RUB has been in a strong uptrend this year as the impact of Western sanctions on Russia hit. Recent economic numbers have shown the dire situation in which the Russian economy is in.
For example, Russian oil exports have been in a downward trend. Data by S&P Global shows that crude exports slumped to less than 3 million barrels, the lowest increase since November last year.
Complicating the situation is the slowdown of the Chinese economy. Recent data showed that China’s imports have fallen while other parts like industrial production and manufacturing output have slumped.
Meanwhile, the prices of other products that Russia sells have been pressured lately. Wheat has dropped by more than 50% from its highest point in 2022. Similarly, wheat, platinum, palladium, and natural gas prices have been in a downward trend. Non-energy imports have fallen by almost 20% this year.
Russia’s economy is facing additional challenges. For example, the budget deficit has widened in the past few months as Russia has increased its military spending. The most recent report showed that Russia’s budget deficit widened to over $29.3 billion between January and July.
The challenge is that Russia needs a lot of foreign currency to fund its imports from countries like China and Russia. Most imports take place in US dollar, which explains why Russia is supporting the new initiatives by BRICS.
Complicating the situation is the fact that the US dollar index (DXY) has strengthened in the past few weeks. The DXY index has jumped to $104, the highest level since June this year.
USD/RUB technical analysis
The daily chart shows that the USD/RUB exchange rate has been in a strong bullish trend in the past few months. It jumped and crossed the important resistance point at 100 recent. In most periods, financial assets tend to waver after reaching an important resistance or support level.
The USD to RUB pair is still above the 50-day moving average while the Relative Strength Index (RSI) moved to the neutral point. Therefore, I suspect that the pair will continue rising as buyers target the initial resistance level at 110. A drop below the support at 91.43 will point to more downside.
The post USD/RUB: Weakened Russian ruble meets a resurgent US dollar appeared first on Invezz.
