The Trouble in Trading the Russian Ruble

With all that’s going on in Russia these days, I’m pretty sure you’ve considered trading the ruble at one point or another. But is it really worth adding the Russian ruble to your forex watch list?

forex russian rubleThe past year was an interesting one for Russia, as the country was put in the hot seat for supporting the rebel movement in Ukraine. The international community was mostly displeased by this, leading the European Union and the United States to enforce sanctions on Russia’s financial and energy sectors. Eventually, these sparked widespread economic weakness and a massive depreciation for the Russian currency.

With that, the Central Bank of Russia decided to put an end to the ruble’s tumble by announcing an emergency interest rate hike from 10.5% to 17% in December. The Russian Finance Ministry also stepped in and declared that it is prepared to sell $7 billion worth of foreign currency to prop up the ruble. Instead of stabilizing the currency though, these moves resulted to market panic and further currency depreciation!

Forex industry experts explained that the lack of liquidity among ruble pairs was to blame for these volatile price swings. After all, several large banks and financial institutions previously suspended Russian currency settlement as the geopolitical conflict and market uncertainties started to escalate earlier in the year. Later on, forex brokers such as Saxo Bank, IC Markets and GAIN Capital decided to cut leverage for USD/RUB and EUR/RUB while Alpari UK, FXCM, Dukascopy, and AxiTrader halted trading for these currency pairs altogether.

Word through Wall Street lately is that some brokers, such as Alpari Russia and FX Pro, already resumed offering USD/RUB and EUR/RUB on their trading platforms. However, FX Pro clarified in a statement that the ruble is likely to undergo periods of extreme volatility and severely widened spreads since liquidity shortages are often occurring. They added that it is possible for ruble trading to be suspended again, depending on market conditions.

Apart from spot forex, other options for trading the Russian ruble remain available. One of these is the Dubai Gold and Commodities Exchange’s (DGCX) newly-offered futures contracts on the ruble. According to the exchange’s Interim CEO Gaurang Desai, these emerging markets currency futures represents an important facet of their comprehensive and long-term product strategy, as these would allow businesses to hedge against currency price risks.

For now, the Moscow Exchange (MOEX) is still closed for the holidays, with forex trading operations set to reopen in January 10. While more brokers could also resume offering ruble pairs on their platforms by then, market watchers are still wary that erratic price movements could discourage most traders from trading the Russian currency. If volatility ain’t your cup of tea, y’all better exercise more caution if you’re planning to trade the ruble!

  • ForExchange

    Hi Ninja,

    what a great article to start the year with.

    I have some experience trading the RUB so I might add two of those to your points above:

    1. It can happen that you cannot set an optimal SL at your broker.

    The fact is, that I can only set a 10 000 pips SL at my broker. Now this seems to be huge but at some exotic pairs it is very little. For example if you buy USD/RUB at 60.0000 then the maximum SL would be at 59.0000. This is a very little difference if we look at the daily movements these days. On 16.12.2014. the pair moved 180 000 pips (!!!) so a 10 000 pip SL most can only bring money to your broker. Before trading the RUB check out the SL conditions and if it is the same as it is for me then you have to have most likely a visual stop and execute it yourself.

    2. Small liquidity makes huge spread which effects the SL.

    This is connecting to the first point and maybe shows that a SL is impossible, even if you want to use it. At night, when liquidity is even smaller than usually, yesterday the spread was 45 00 pips. So this means if you had the maximum of 10 000 SL in place, even if price would not have moved against you, your SL was hit.

    Now I also have a question to you: I do not understand why brokers do not let traders trade the RUB pairs. This was very interesting to me. We know that brokers make money when traders lose. So for them this huge volatility is the best thing that could happen as they make easy money on retail traders. So why would they want to work against themselves?

    Thanks for the article,

    FE

    • Thanks for the positive feedback! Yeah I had to do a bit more research on this one since I’m also questioning how come some brokers don’t have the USDRUB pair on their platforms, and I still come back to the liquidity issue. I do hope there will be more options to trade RUB these days though!

  • Extreme_One

    I have always wondered why not more websites focus on exotic currency trading. Most of MT4 brokers have many exotics listed but you can’t trade them. I have yet to find one that I would say is somewhat complete in exotic currency trading coverage.

    • Ha, yes. I guess it’s not for newbie traders since the spreads are wider and volatility is generally higher so you’d definitely have to come up with a more solid trading strategy to profit from exotic currencies. Then again, there appears to be a growing interest in these so I’m thinking liquidity and coverage could improve at some point.

      • Extreme_One

        U calling me noob bro? =) Just kidding.
        What is interesting is most brokers that are based in Russia even years before the crisis didn’t offer trades in RUB pairs. Just had them listed.
        I think atm the cheapest way to trade USDRUB is by CFD’s. Swissquote however still offers trades in their MT4 platform.
        If you find a MT4 broker that offers maximum numbers of exotics let me know.

        • ForExchange

          I agree with the whole discussion on exotic currencies. I am also very interested and study those. The carry trade is also a lot better, when you get it right then it can be a real revenue source.

          FE

          • Good to know! I’ll do more homework on these and I’ll try to post what I’m able to learn. See you around!

        • What? No, I’d never call the Extreme_One a noob, haha. But yeah, good point about those forex brokers based in Russia but don’t offer RUB pairs. I’m still having trouble finding a broker that offers decent spreads on those, although CFDs do seem to be a more viable option. Thanks for sharing your thoughts!

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  • Dominnik

    is ruble profitable , isn’t it good to buy when it’s down and expect increase ?