Trump's Presidency: A Double-Edged Sword for Russia's Rouble

The election of Donald Trump as the U.S. President has sparked speculation about the potential impact on Russia's rouble. While some analysts expect a rally in the rouble driven by payments for Russian exports and resumption of foreign investment, others warn of a free fall due to deferred demand for imports. This article explores the potential implications of Trump's presidency on the rouble's value.



Sanctions and the Rouble

One of the most significant factors influencing the rouble's value is the sanctions imposed on Russia. The rouble has been driven by battlefield developments and sanctions rather than macroeconomic fundamentals, making it challenging to calculate its fair value. Estimates are getting scarcer, and many international analysts have stopped publishing rouble research and calculations.

If Trump's policies lead to the lifting or easing of sanctions, it could potentially boost the rouble's exchange rate. However, this is unlikely to happen until a sustainable resolution to the war is found, which could take years. In the meantime, the rouble's value will continue to be influenced by geopolitical developments and market sentiment.

Trump's Rhetoric and the Rouble

Trump's rhetoric, particularly his Russia-related tweets, has been shown to have an impact on the rouble's exchange rate. A study found that escalation of negative sentiment in Trump's Russia-related tweets led to ruble depreciation of 4-10% in short-term periods (around 3 days). Though these episodes tend to coincide with the imposition or announcement of US sanctions, the study demonstrates that US sanctions that were not accompanied by negative tweets of Donald Trump did not cause ruble depreciation. This highlights the role of emotional factors in economic decision-making behavior.



U.S. Aid to Ukraine and the Rouble

Many expect Trump's victory to lead to a reduction in U.S. aid for Ukraine. A decrease in U.S. aid could potentially weaken the Ukrainian hryvnia, which might indirectly affect the rouble's exchange rate through regional economic interdependencies. However, the extent of this impact is uncertain and would depend on various factors, including the magnitude of the aid reduction and the overall economic situation in the region.

In conclusion, Trump's presidency could have a significant impact on the rouble's value through sanctions, his rhetoric, and changes in U.S. aid for Ukraine. However, the specific outcomes would depend on various factors and could be influenced by other economic and political developments. As the situation in Ukraine and Russia continues to evolve, investors and market participants should closely monitor geopolitical developments and market sentiment to make informed decisions about the rouble's future performance.