Going the Other Way

Even while newspaper headlines are still full about the ruble’s panic sell-off last week, the ruble has actually risen by 39% from last week’s intra-day lows near 80 to the dollar over the past five trading days (1 ruble was 0.0125 dollars at one point on December 16, while at the time of writing early on Monday, 1 ruble was 0.0174 dollars. That is an increase in the currency’s value of more than 39%). In the traditional notation USDRUB it’s a decline from 80 to 57.48. In early trading on Monday, the ruble has moved back to the level it inhabited on December 5. Anyone shorting the ruble between December 5 and December 16 or selling his rubles for foreign currency during this time period is now deeply underwater:


USDRUB-short termThe Russian ruble goes the other way – click to enlarge.


Incidentally, crude oil prices have begun to trade slightly firmer as well, in spite of a continuation of the barrage of ostensibly bearish news (such as this report about Saudi Arabia swearing up and down it won’t cut production).

However, both Brent and WTI are only back near the upper end of last week’s volatile trading range, which is a far cry from the extent of the ruble’s rebound. This makes it all the more likely that the selling squall in the ruble was indeed caused by traders front-running Rosneft’s debt payment.

 Brent, one weekBrent crude, February contract over the past week – click to enlarge.


Last week we compared the panic selling in the ruble to the panic in the South African rand in 2001. We could also have used other examples, such as the sell-off in Asian currencies like the South Korean won or the Indonesian rupiah in 1997-1998. The point remains that such panic sell-offs almost always turn out to be buying opportunities in hindsight. The louder the screaming of the headlines in the press, the more likely this will turn out to be the case.

When the ruble gained on Friday allegedly on “verbal support” and “expectations that exporters would sell dollars” (there were no such expectations three days earlier?), it was still widely expected that the currency would “remain under pressure going into the weekend” due to a “frenzy of retail FX buying”. The weekend has passed and the ruble has kept gaining ground. After all, short term ruble interest rates are now at almost 18% and as we noted last week, money supply growth in Russia has been slowing sharply in recent years. It seems also possible that some of those retail traders have realized that nearly every Russian FX buyer over the month of December is by now nursing losses.

If the parallel with previous panic sell-offs in currencies continues to play out, we should expect to see some sort of “retest”, most likely in the form of a higher low being put in at some point over coming days or weeks.



When everybody else panics, it is often a good time to buy. Given the usual pattern of rebounds from panic lows, one more good opportunity should present itself in the near future, as buyers who have snapped up rubles near the lows take profits (a 39% rebound from the lows is not chickenfeed after all).


Charts by: barchart.com




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4 Responses to “Ruble Anti-Panic”

  • rodney:

    Do you read the comments at all? If so, please acknowledge my comment from the last post (“The ruble rebounds”) and enlighten us by showing a way to actually participate in ruble longs.

    • worldend666:

      You could buy yourself some Russian equities. They have by and large ignored the currency swings.

      • rodney:

        Yes, thanks. I thought about it, and it’s not a bad idea, but you don’t get the leverage of the spot forex market, and that’s important for me.

        I’ll tell you when the likes of Alpari, FXCM et al. will re-enable USD/RUB trading: When interbank traders have taken full advantage of the opportunity that was present, i.e. when they want to dump their rubles on retail traders.

        • worldend666:

          Hi Rodney

          You might try trading an option or a future on a gazprom ADR if you really want leverage, although it’s certainly volatile enough already :)

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