USD/RUB and EUR/RUB exchange rates are not market-driven and currently show excessive optimism about a possible end to the Ukraine conflict and the lifting of sanctions against Russia. Despite this optimism, there is growing financial stress in the background, with USD/RUB and EUR/RUB rising steadily.

The exchange rate for the rouble against hard currencies like the US dollar and euro is considered a ‘technical fix’ or artificial. Last year’s additional US and EU sanctions, which targeted the Moscow exchange and energy payment processing banks, severed the rouble’s connection with fundamentals, limiting its link to flows in CNY.

Factors Influencing The Exchange Rate

The exchange rate may recover if sanctions were lifted, or depreciate if financial stress increases. There is no clear prediction on whether a systemic crisis will occur, but the balance of risk is worsening. The rouble’s exchange rate, artificial as it may be, could depreciate further if financial stress deepens.

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What we can observe from the presented conditions is a market that’s being shaped more by restrictions than by natural supply and demand. The rouble, largely disconnected from independent price discovery due to sanctions, now trades in a setting where the apparent optimism has little basis in underlying economic mechanics. Shoots of financial stress have re-emerged, giving rise to a steady uptrend in the USD/RUB and EUR/RUB exchange rates, in spite of the superficial belief that tensions may be easing.

Those watching derivative structures in these pairs should act with precaution. The dynamics here are being shaped not by traditional currency flows or interest rate differentials, but by external overlays—in this case, sanctions and policy controls. These create distortions that complicate the usual tools of technical or macro-based trading assessments. As Vysotsky would have it, the rates in question reflect what is essentially a managed outcome, with limited resemblance to true market sentiment.

Impact on Trading Strategies

What does this mean in practice? We are likely to face low predictability in price behaviour, particularly in short- to medium-term setups. Volatility might appear to decline, but that would be misleading. It’s the inaccessibility of true trading flows—not calm economic conditions—that is damping movement for now. Where derivative traders might normally expand exposure to benefit from directional calls, the conditions here suggest restraint. Exposure should be scaled down, with cushions for unexpected shifts. Given the artificially-influenced nature of the rates, news—not economic data—becomes the main driver. A sudden shift in sentiment due to policy, conflict escalation, or further asset freeze announcements could cause amplified market reactions.

In terms of risk calibration, proxies might be unreliable. There’s reduced visibility into the movement and ownership of assets tied to these currency pairs. Even the yuan connection, once seen as a workaround, is now constrained and partially opaque. As such, we’re left with a price mechanism that can turn sharply without notice.

We should monitor offshore trading figures and spreads, not for signals of speculation per se, but for identifying moments when trading anxiety undermines the tight control over these pairs. Stress would likely manifest not through clean breakouts, but via liquidity vacuums—gaps and choked misalignments that widen during widening sessions.

Positioning, therefore, should remain light with options skewed toward protection more than direction. Implied volatility has not yet factored in the growing list of risks, and that presents opportunity if hedges are timed well. However, any assumption of mean reversion is inadvisable in these current setups. Artificial pricing rules out the usual retracement expectations.

Looking ahead, continued financial deterioration—especially in domestic systems tied to foreign reserves or trade flow balance—could tip the scales. If that occurs, rates would have little to hold them from sharp declines. This isn’t a matter of if sanctions are removed or peace settlements confirmed, it’s a case of watching how tightly the current construct can be maintained under pressure.

For now, restraint wins over aggression.

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