The markets are open, and the currency market is hot. Up on the trading floor, we stopped by for a chat with Banc De Binary’s Senior Analyst, Raymond Reagon, to probe him on the falling Russian Ruble.

 

BDB Blog: Raymond, what’s all the commotion about this morning?

R. R.: The Ruble is falling. Traders need to know that the USD/RUB has been on a downward slope ever since the Kremlin invaded Crimea.

BDB Blog: What does Crimea have to do with the falling Ruble?

R. R.: The fall of the Ruble can be attributed to two main causes. Obviously, the sanctions imposed by the EU has a lot to do with it. But, the falling price of oil also means that Russian oil exports, via Gazprom, a major source of revenue for Russia, has been drastically falling. In order to balance it’s national budget sheet, Russia needs to sell oil at $100 per barrel, and as oil is trading today at 55, you can bet the Ruble will feel that pressure.

BDB Blog: Okay. But let’s get down to the root causes here. Why is oil plummeting?

R. R.: Supply and Demand. Saudi Arabia is continually producing more and more oil, and, at the same time its offering discounts to Asia. The OPEC countries aren’t happy with the cheaper oil prices, especially Venezuela. Everyone knows, the continued rate of production is causing the oil price to come down, and OPEC is telling the Saudis to cut production, but the Saudis aren’t listening.

BDB Blog: Why aren’t the Saudis cutting production? Do you think it has something to do with America and Saudi Arabia being allies, and America pressuring the Saudis to keep squeezing the Russian economy.

R. R.: It’s impossible to say for sure. But, that’s one theory.

BDB Blog: Thank you for your time.

R. R.: My pleasure.

 

So, there you have it, the underlying causes of three falling assets: Oil, GAZPROM, and the USD/RUB currency pair. Below are 3-month charts of these 3 assets.