A Basic Guide to the Russian Ruble in Forex Trading
The official currency of Russia is the Russian Ruble, which is denoted by the Forex symbol RUB and the currency symbol ₽. The Russian Ruble is also the official currency of Abkhazia and South Ossetia which are two partially recognised republics. The Ruble has been the nation’s currency since the days of the Russian Empire and it was also legal tender throughout the period of the Soviet Union. Although Transnistria and Belarus have a currency known as the Ruble, these are distinct entities and are separate currencies in their own right. The Russian Ruble was the first currency to be decimalised in the world back in 1704, and since that time each Ruble has been worth 100 Kopeks (Russian: копе́йка, tr. kopeyka). The country’s national bank is the Bank of Russia (sometimes known as the Central Bank of the Russian Federation). It is an independent body that has been charged with protecting the currency’s stability, regulating the banking industry, issuing coins and bank notes, and setting standards for accounting and banking operations.
The Russian Ruble – a Brief History
The term Ruble comes from the Russian word rubit, which translates as “to cut”. It is believed that this name was given because the original coins were cast using a cutting technique. From the 14th century up to the 17th century, the term Ruble was actually not referring to the currency but instead to a unit of account and weight. It was not until 1704 that Peter the Great reformed the monetary system in the country and ordered a new silver Ruble coin to be minted that was divided up into 100 copper Kopeks. The gold Ruble was pegged to the French Franc in 1885 but this was dropped at the start of the First World War when the currency depreciated in value leading to hyperinflation in the early part of the 1920s. When the Soviet Union was founded in 1922, the Soviet Ruble replaced the Russian Ruble, and when the Soviet Union broke up in 1991, the Russian Federation retained the Ruble as its official currency, simply issuing new bank notes bearing the name Bank of Russia in 1993. The Russian Ruble saw significant devaluation during the early 1990s due to hyperinflation, and this led to a redenomination of the currency in 1998 as an administrative move to reduce the old Ruble’s unwieldiness. Unfortunately, this took place as the 1998 Russian financial crisis was breaking out and thus the currency lost 70% in value against the USD in just 6 months. In 2010, an announcement was released that Russia and China would use their own national currencies for bilateral trading rather than the US Dollar as was formerly the case. This was done in an attempt to improve the relationship between Moscow and Beijing as well as to protect the domestic economy.
Russia and its Economy
Russia is known to have a mixed, upper-middle income economy with several strategic areas of state ownership. During the 1990s, a lot of Russian agriculture and industries were privatised, however the defence and energy sectors were excluded from privatisation. Russia is an enormous country and the country’s vastness is key to its economic activity. It has been estimated that the nation holds more than 30% of global natural resources at a total approximate worth of $75 trillion USD. Much of the country’s economic growth relies on energy revenues thanks to Russia’s abundance of natural gas, precious metals and oil. These commodities are the main part of Russia’s exports, although the nation’s arms industry also brings in significant revenue. Russia is well known for its military exports including submarines, ships, air defense systems and combat aircraft, however other important economic sectors include agriculture, forestry and fishing. The largest sector of Russia’s economy, however, is the service industry which accounts for around 60% of the nation’s GDP and includes the health, education, communications and retail trade industries. Mining is also important to the economy, as is the construction sector.
Factors That Affect the Russian Ruble
One of the major factors that impacts upon the value of the Russian Ruble is the global price of oil as the Russian economy is heavily dependent upon the health of the energy industry. Russia’s petroleum industry is among the largest in the world and therefore fluctuations in oil prices will necessarily cause economic shifts in the country. Global demand for Russia’s other major exports such as machinery and consumer goods also affects the value of the Ruble on the Forex market. Political unrest is also a major factor in this area, and any difficulties with neighbouring Ukraine can affect the exchange rate of the Russian Ruble. Around one fifth of Ukraine’s imports come from Russia and therefore any unrest between the two nations will have implications for the Russian economy.