Why is the EUR/USD currency pair more popular among traders on the Forex market in Russia, despite the availability of the USD/RUR pair? Let’s explore the advantages and disadvantages of trading with the Russian ruble.
Advantages and Disadvantages of Trading with the Russian Ruble
Are there clear advantages to trading the EUR/USD pair? First, it’s worth noting the lack of macroeconomic data on Russia and the ruble. Many traders, looking at the vast number of news articles published about countries using the euro and the dollar, might point to a lack of information as the main reason for the low popularity of the USD/RUR pair. However, this is a mistake! There are many resources that cover the ruble’s performance against the euro or the dollar. When choosing to trade this pair, you will definitely not face an information vacuum.
Second, the spreads and commissions on the USD/RUR pair may be off-putting. While the average spread for EUR/USD is around 2 points, and as low as 0.5 points on five-digit quotes, the spread for USD/RUR can vary by a factor of several times among different brokers. Additionally, leverage, trade sizes, execution, and other trading characteristics for EUR/USD appear slightly more favorable. For traders, what matters most is low fees, availability of information, and high liquidity.
Periods of Ruble Liquidity
Speaking of liquidity, USD/RUR is actively traded during the working hours of the Moscow Exchange. After closing, the pair’s liquidity decreases, and the chart clearly shows a sideways movement, known in trader slang as a ‘sawtooth.’
Рис. 1. «Пила» на графике валютной пары USD/RUR (Н1).Some brokers do not show these periods in their terminals, meaning trading closes at 24:00 and opens again at 8:00 (server time), creating a familiar-looking chart similar to EUR/USD.
Рис. 2. Скорректированный график валютной пары USD/RUR (Н1).Additionally, the most popular platform today is MetaTrader 4, which includes the EUR/USD pair for every broker, and some also offer USD/RUR. In any case, nearly all have indicative quotes for USD/RUR and EUR/RUR.
Рис. 3. Пример индикативных котировок USD/RUR и EUR/RUR в терминале МТ4.The Big Mac Index and Trading via Yandex
How can you predict the ruble’s exchange rate relative to the dollar or euro? All methods of fundamental, technical, or graphical analysis apply. Moreover, there are quite interesting unconventional analysis methods. For example, there is the Big Mac Index, which is an unofficial way to determine the purchasing power parity of national currencies, with the standard burger from McDonald’s as the basis. In the US, a Big Mac costs $4.33, while in Russia, it costs 2.29 dollars (75 rubles), meaning the ruble is undervalued by almost 53%.
I’ll show another rather unconventional way to trade ruble pairs. Let’s call it: Trading via the Yandex Homepage. Yes, you heard right! The idea is quite simple, and that’s what makes it appealing to beginner traders. Here’s what you need to do: open the Yandex homepage and look for exchange rates marked as ‘for tomorrow.’
Рис. 4. Стратегия «Торговля по главной странице Яндекса».Check the terminal or online charting websites where the current rate is displayed, and open trades in the direction of the rates set by the Central Bank. This description is not a trading system, but it’s worth observing whether these rates are met.
What Influences the Ruble’s Exchange Rate?
How does the Central Bank of Russia influence the ruble’s exchange rate? Figuratively speaking, the rate is smoothly regulated when necessary. One of the goals of the Russian Central Bank is to ensure the stability of the national currency. At the same time, the Bank conducts exchange rate policy within the framework of a managed floating exchange rate regime. The policy is quite interesting: on one hand, the Central Bank of Russia does not hinder the formation of trends in the ruble’s exchange rate, driven by fundamental macroeconomic factors; on the other hand, it smooths out sharp fluctuations in the exchange rate. It may seem like total authoritarianism, but let’s recall the recent foreign exchange interventions by the Swiss National Bank, which rigidly tied the euro to 1.20 francs, or the interventions carried out by the Japanese Central Bank. By the way, you can view previous interventions by the Central Bank of Russia here.
The credit and monetary policy of the Central Bank of Russia is reflected in the interest rate. Currently, it stands at 8.25%. You can see the history of interest rate changes on the bank’s website. Usually, a decrease in the interest rate puts downward pressure on the currency.
Events and news from Europe affect the domestic foreign exchange market. Just Greece was enough to make traders stick to their monitors to track the movement in the euro, and it doesn’t matter much which currency—dollar or ruble.
Increasing oil prices and the inflow of foreign capital lead to significant demand for the Russian currency, and in the end, the Central Bank of Russia only tries to smooth out excessive volatility
FAQ
Why is EUR/USD more popular than USD/RUR in Russia?
EUR/USD has lower spreads, better liquidity, and more available information compared to USD/RUR.
What affects the liquidity of USD/RUR?
USD/RUR is most liquid during Moscow Exchange hours, with reduced activity after trading closes.
How does the Central Bank influence the ruble?
The Central Bank manages the ruble’s exchange rate by smoothing out sharp fluctuations while allowing market trends to form.
