Currency moves are always difficult to get your head around, as you have to think of everything in relative terms. When comparing the US and Russia, it’s a little easier to see why the dollar is appreciating versus the ruble.
- Economic growth: Our economy is predicted to grow about 3% this year versus a loss of 5% or more in Russia’s GDP. Advantage: US
- Oil prices: Although our oil production has dramatically increased over the past few years, we are a net oil importer. Lower oil prices help our economy. On the other hand, Russia is a net exporter, with oil representing about 70% of that country’s total exports. Lower prices have significantly affected their economy. Advantage: US
- International sanctions against Russia over the conflict in Ukraine have also hampered business there. Advantage: US
When comparing the two economies, an investor would likely conclude that the US is a safer place to invest with strong, diversified economy that is boosted by lower oil prices. This means the currency is also relatively safer and stronger compared to Russia’s, leading to a strengthening US dollar.