The rise of the petro-ruble exposes unstable US Dollar

FXOpen

Emerging economies with developed and diversified industry bases are beginning to look toward joining the economic and trade blocs which are not aligned with Europe or the United States, as Argentina becomes the latest to explore joining the BRICS (Brasil, Russia, India, China, South Africa) economic group.

Argentina is home to an inflationary currency, and has a long history of unstable government, however it is a large producer of a diverse range of products for export all the way from mass-produced food to cars and trucks.

President Alberto Fernandez said that if Argentina was to join the BRICS group, it would help to foment a "new world order based on development".

Right now, the currencies of the West are beginning to demonstrate the full effect of the political movements of the past two years as inflation rages rampant across Europe and North America following lockdowns, and the cost of raw materials and energy products head for the stratosphere due to the all-encompassing sanctions on Russia led by Europe and the United States.

Meanwhile, the emerging nations are looking at India, China and Russia as economic forces which are growing and the union between those three being ever stronger.

Add the inflation in Europe and North America to the dollar and euro now having less importance as commodities settlement currencies, and there is a notcable movement upwards for outlying currencies.

The ruble is on the rise again this morning and is currently at 58 rubles to the US Dollar, which is a five-year high for the Russian currency.

Western customers of Russian oil and gas companies having to settle transactions in rubles has tied the ruble to valuable consumable commodities, and the oil and gas prices are also high at the moment, making this an advantageous situation for the ruble.

There was some talk in the middle of last decade about a potential emergence of the 'petro-ruble' but that subsided and the majors continued to reign supreme, however nowadays there is a distinct case for the petro-ruble as its value responded immediately to the legislation which determined that all Western nations must pay for energy materials from Russian companies in rubles.

Just 2 months ago, the ruble was at 134 to the US dollar, and now it is at 58.

That is volatility, and it is volatility driven by a strong raw materials and commodities market across the OPEC countries and a weakening Western economy dogged by inflation and political wrangling.

There are even some commentators who believe that once the US Dollar is no longer viewed as the global 'petro-currency', we could see even more volatility in the currency, commodity and US stock markets.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Stay ahead of the market!

Subscribe now to our mailing list and receive the latest market news and insights delivered directly to your inbox.

forex

Forex Trading with FXOpen

Forex Trading with FXOpen

Experience ECN technology for deep liquidity and light-speed trade execution

  • Access over 50 markets
  • Trade with spreads from 0.0 pips
  • Take advantage of commissions from $1.50/lot
Learn more

Latest articles

USD/CAD Consolidates
Forex Analysis

USD/CAD Consolidates

In the second half of April, the USD/CAD chart has shown a decline in volatility following significant spikes observed since February.

The Canadian dollar has stabilised against the US dollar within the 1.390–1.380 range over the

Why Coinbase (COIN) Shares Are Rising
Shares

Why Coinbase (COIN) Shares Are Rising

As the Coinbase (COIN) stock chart shows, trading closed yesterday above the $200 mark — for the first time since March.

Since the beginning of April, COIN's share price has risen by nearly 20%, while the S&P 500 index

Forex Analysis

USD/CHF Rebounds from Multi-Year Low

As the charts show, the USD/CHF exchange rate fell below 0.810 US dollars per franc earlier this week. The pair had not traded this low since the 2008 financial crisis. Demand for the Swiss franc as a safe-haven

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.