Market Optimism Surrounds Trump’s Ukraine-Russia Peace Pledge
As Donald Trump vows to swiftly end the Ukraine-Russia conflict, investors are eyeing the potential impact on the Russian rouble, which has been shunned by the global community due to sanctions.
Rouble’s Recent Performance
The rouble began 2025 on shaky ground, plummeting to its weakest point since March 2022. However, it has since rebounded by approximately 10%, making it the top-performing currency in emerging markets. Despite US energy sanctions imposed in January, the currency is on track for its best month since the emergency interest rate hikes and capital controls were introduced in February 2022.
Potential Impact of Trump-Putin Talks
Some analysts predict that direct talks between Trump and Russian President Vladimir Putin could lead to the partial lifting of Western sanctions on Moscow. This, in turn, could trigger a rouble rally driven by increased payments for Russian exports and the resumption of foreign investment. Others warn that huge deferred demand for imports could send the rouble into a tailspin.
Calculating the Rouble’s Fair Value
The rouble’s value has been heavily influenced by battlefield developments and sanctions, making it challenging to determine its fair value. Many international analysts have ceased publishing rouble research, leaving the Moscow Stock Exchange and Russian banks to develop data products for the domestic market.
Rouble’s Unpredictability
Since spring 2022, the rouble’s movements have been highly unpredictable. Market panic at the start of the war saw the currency plummet to 150 to the dollar, while Russia’s efforts to stem forex outflows led to a sharp strengthening to around 50 to the dollar in June 2022.
Russia’s Forex Market Under Sanctions
Following US sanctions on the Moscow Stock Exchange in June 2024, dollar and euro trades shifted to over-the-counter markets between banks. The Chinese yuan has become the most traded currency on the exchange, and the central bank sets official exchange rates based on interbank trade data.
Banking and Forex Activities in Russia
Despite sanctions, nearly half of Russia’s 316 banks can still buy and sell dollars and euros. Subsidiaries of major Western banks, such as UniCredit and Raiffeisen Bank International, continue to operate in the country. Domestic demand for dollars and euros comes from importing companies, although the share of these currencies in foreign trade is expected to decrease.
Leave a Reply