Russian ruble hits new highs in 2015
The ruble hit a new 2015 high on July 13 of 56.38 against the US dollar and 62.74 against the euro. The ruble had appreciated and peaked to 48.67 on May 17, 2015. In this series, we’ll look at the performances of the major currencies in comparison to the Russian ruble.
From the above graph, we can see that the Russian ruble is strengthening with respect to currencies of other developed countries, including the British pound, the euro, and the Japanese yen. The below graph shows the ruble’s performance over the last five years.
Despite volatile oil prices, the Russian ruble has proved its strength, unlike in the second half of last year when oil prices collapsed. In addition, Western sanctions were also imposed on Russia over Moscow’s involvement in Ukraine. Now let’s take a short glimpse of Russia’s economic situation at present.
Russian economy and oil
Russia is now one of the major oil exporters in competition with the United States and Saudi Arabia. Natural gas and Brent crude oil are important drivers for Russian exports. Together, natural gas and crude oil earn half of the country’s revenue. With rising oil production and the slowing economic growth in Europe and Asia, oil supply has risen drastically, outpacing the demand.
In the below chart, we can see that OPEC’s (Organization of the Petroleum Exporting Countries) oil production has fallen by 0.1%, whereas non-OPEC production grew by 1.9%, leading to global oil production growth of 1.8%. On the other hand, world oil consumption growth was at only 0.9%, which resulted in a large oil inventory in 2014 and thus lower oil prices. However, the ruble has been resilient to the weakening oil prices.
Confidence in the ruble indirectly impacts the country’s ADRs (American Depository Receipts). Thus, we have seen a rising trend in the ADRs of LUKOIL (LUKOY), Surgutneftegas (SGTZY), Gazprom (OGZPY), and Rosneft (OJSCY), as well as with the VanEck Vectors Russia ETF (RSX).
In the next part of the series, we will look at what is boosting Russian currency and equity.