Over last few day I have received fair number of questions from people wanting to trade some of the emerging economies currencies. Most of this followed the first BRIC summit, which took place earlier in the week. The meeting raised important questions about the dollar and increased interest in currencies of BRIC countries. All of a sudden more people want to trade Ruble, Yuan, Real and Rupee. Unfortunately very few brokers offer them to trade. This is unlikely to change anytime soon, even though BRIC participants agreed in principle to hold each other currencies as reserves and use them for trade among members. Of course implementation of this agreement would take a long time, if it ever fully happens.
Dollar has become a favorite whipping boy of world’s press. Never ending accusations have been made that the U.S. is purposely trying to devalue the dollar to lessen its growing debt burden. Whether it is deliberate or not, remains to be seen, but there’s ltlle doubt the ultra-stimulative policy actions taken by the Fed have tremendous potential inflationary implications.  This alone was enough for above mentioned countries to suggest using their currencies as a reserve. Like Russia.
The concept of Ruble becoming some kind of international benchmark is a laughable notion. During time of crisis one would expect true reserve currency to be most stable, or least unstable. This is hardly the case for RUB. In fact, Ruble was one of the biggest losers of last year. It came under attack shedding 58 percent of its value. The collapse stopped only after the Russian central bank stepped in repeatedly to defend the currency’s value. They spent more than 1/3 of its currency reserves buying Rubles and selling more than $200 billion worth of Dollars. One of the most expensive interventions in history.

Exchange rate of RUB has recovered to some degree, but it still has ways to go before pre-crisis levels are reached. In case anybody forgot, it was in 1998, only a decade ago, when government of Russia DEFAULTED on something like $40 Billion in debt. Hardly a confidence builder and not a trait of reserve currency. About the most Ruble can accomplish in foreseeable future, is to reach the status of commodity currency, along AUD and CAD. Maybe.
As far as I’m concerned, BRIC currencies are not really tradable, except for the largest of time scales. Over time they will gain broader  acceptance and become viable financial instruments. Good news, because this means that Forex trading has bright future. Meanwhile, I’ll look for trades in other places.

Euro-Swiss Franc was subject of increased volatility last week, after intervention. Swiss National Bank wants weaker CHF, especially in relation to EUR. I intend to buy it after the open, looking for 50 pips. If this happens, 1.5150 level will be explored for another, bigger trade. Should sizeable gaps develop at the start of trading, my strategy will be adjusted to close them. Also, Yen pairs will be watched for more signs of deterioration this week.

Mike K.