Could The Ruble Become A Reserve Currency?

Prior to the US dollar being in place as the number one reserve, the British pound held that honor.  But a number of factors led to the dollar taking over, not least the many problems which beset the pound from the 18th century onwards.

But what exactly is a reserve currency?

Well it is basically a currency that exists in such a large amount that many governments can keep a large quantity of it in their reserves.  As things stand at the moment the US dollar is way out in front of all the other countries, with over sixty per cent of the world’s reserves being made up from US dollars.

So where does the ruble fit into all this?  The answer lies in a recent news story.  It featured in more than one source but perhaps it is fitting that we visit the Moscow Times website to find out more.  You can view their news story at this link.

Now if you were to look at any table of the world’s most used reserve currencies, the Russian ruble would not feature on any of them.  At least, it wouldn’t feature in the higher parts of the table.  More likely, it would be lumped into the ‘other’ category.

But the idea is not to conquer the world with the ruble.  Apparently, the idea is to bring it to the point where it could be a reserve currency within a specific region.  Although it should be said that the President of the country seems to be of the view that the ruble could achieve bigger and better things if given the chance.

If one thing is certain, it is that we are in strange times.  The US dollar may be very far from falling off its perch as the world’s reserve currency.  But stranger things have – and probably will – happen.  After all, did anyone believe back in the 18th and 19th centuries that the British pound could ever be challenged as the number one reserve currency?  Times are very different now to how they were then, but that does not mean they couldn’t change again.

Of course news like this can have an effect on the exchange rates as well.  Positive noises about one currency can mean you get to see very different figures on your currency converter.  Let’s see how the ruble is doing against the US dollar to see if we can get a picture of how the young pretender to the crown could be doing.

Back on the 12th April one ruble would get you 0.02982 US dollars.  That went up to 0.03007 on the 24th, before dipping back down to 0.02992 on the 27th.  But two days later on the 29th April the ruble bounced back and managed to break through the 0.030 barrier again.

And that is where it has stayed ever since, at least up until the time of writing.  In fact on the 12th May – the same day that the news story in the Moscow Times was published online – the ruble actually finished up higher still, on 0.03117.

So does this bode well for the future?  Looking at the exchange rates between these two countries is interesting, but it does not give us the full picture.  And of course there is not going to be a sudden change in the number one reserve currency.  That type of change only happens after there have been a chain of events that occur all at just the right time to make it happen.  It could be years before the ruble was ever in a position to claim the crown of being the reserve currency of choice for lots of other countries.

It is fascinating to speculate on which currency might be the next one to take the crown though.  As we can see from history, these changes do not happen that often, and given how long the pound held that position for, it could be a while yet before the dollar is lost.

But speculating on this type of change is what entertains some people, and with confident speech from the President of Russia why shouldn’t we talk about which currency could be the next to become the world’s biggest reserve currency?