USDRUB: Russian Ruble Could Be One of the Fastest-Rising Currencies of 2017
The Russian ruble has outperformed most major currencies. Just as Russian President Vladimir Putin has put out a strong fight against American sanctions, the ruble has resisted the revaluation of the U.S. dollar. The USDRUB could cross the 60.00 mark and see even greater gains in 2017.
The USDRUB traded at about 67.00-68.00 for most of 2016. It was as high as 81.00 in January 2016. The ruble might even be gaining too much value against the dollar and other major currencies like the euro. Indeed, the ruble has recovered a third of its value at the start of 2016 since last September.
Russian Minister of Finance Anton Siluanov has even expressed concerns that too strong a ruble could make Russia’s exports less competitive. But the ruble’s performance is just one of many signs that Russia is not cowering under the West’s pressure.
Never Underestimate Russia
Many generals and leaders have taken on Russia and failed. No military analyst challenges the idea that Nazi Germany’s demise began with Adolf Hitler’s Operation Barbarossa, the disastrous plan to invade Russia. There is a deep historical legacy that no leader should ignore.
The lesson is simple: do not underestimate Russian nationalism. U.S. President Barack Obama is, if in a much smaller way, merely the last to discover what happens when you face the legacy of Prince Alexander Nevsky, who is, perhaps—along with Marshal Georgy Zhukov—Russia’s most celebrated military hero.
Nevsky defeated the invading Teutonic Knights in 1242. Napoleon Bonaparte’s ultimate defeat started when his Grande Armée failed to conquer Russia. Napoleon invaded Russia because Czar Alexander I resisted France’s efforts to encroach on Russia. The Czar wanted to restore Russian trade and the value of the ruble, and stop the encroachment on Russia’s borders by hostile nationalists.
If it sounds eerily familiar, it should. It means you’ve paid attention to what has been happening lately around Russia. But Putin sees the election of Donald Trump as U.S. president as a chance to accelerate recovery. As the USDRUB pair drops, the ruble could be the hottest currency of 2017.
In 2017, it’s clear that Russia intends to restore its position in the international arena. The ruble has been gaining steadily over the U.S. dollar in 2016. In December, military and political successes in Syria have served to highlight the Kremlin’s ambitions.
The ruble could gain strength against the dollar even as the American currency achieves parity with the euro. The ruble could rise much faster in 2017 than it did in the last three months of 2016. The markets expect a substantial improvement of U.S.–Russia relations after Donald Trump moves into the White House.
Russian Inflation Drops While the Economy Could Start Growing Again in 2017
Russian inflation is also down thanks to a good harvest, which has lowered consumer prices for Russian families. Recall that Russia is one of the breadbaskets of the world. Along with expectations for a stronger ruble, the Kremlin has raised its GDP estimates for 2016.
Anton Siluanov said that economic growth in 2017 could be even double the 0.6% that is predicted, growing by around 1.1%-1.2%. (Source: “Russia’s GDP growth in 2017 may be two times above 0.6% formal outlook ― finance minister,” TASS, December 28, 2016.)
Meanwhile, Putin’s response to President Obama’s expulsion of 35 Russian diplomats has only contributed to the USDRUB’s course favoring the ruble. Many levels of the U.S. government (but not all) have accused Russia of hacking the U.S. presidential elections last November 8.
Given the hype of recent weeks, many have come to believe that the Russians actually hacked the voting machines. No, the accusations are that Russia intruded by facilitating the publication of the Democratic Party database containing the now-infamous John Podesta e-mails, which may have presented a less-than-flattering portrait of candidate Hillary Clinton.
Washington expected that Russia would reciprocate the expulsions. Indeed, Russia’s Foreign Minister Sergey Lavrov had a list of Americans to expel. But President Putin rejected it. Instead, he sent his best wishes for the New Year to the United States. Putin also invited American diplomats in Moscow to the New Year’s Eve state dinner. Note: December 31 is the most important holiday of the year in Russia.
Thus, Putin has all but mocked Obama. Indeed, Putin has played a move worthy of a great chess master. The Democratic Party and Obama intended for the expulsion of Russian diplomats to hurt Trump’s relationship with Putin, or vice-versa. President-elect Donald Trump takes office on January 20.
By not reciprocating, Putin has kept all lines of dialogue open. He has kept relations warm even as others seem to long for the Cold War. What was cool was Putin. He acted logically, in the style of a Vulcan from Star Trek.
Putin’s message is that the U.S. and Russia can act in a pragmatic way to restore cooperation. Trump also played a formidable move. While criticized for staying silent (he resisted his penchant for Twitter this time), Trump avoided commenting on Obama’s diplomatic offensive.
Putin proves that when you feel strong, there’s no need to grind your teeth. The ruble may reflect this very attitude in 2017.