The value of Russia's petroleum exports rises predictably when it is cold in Europe and declines during the warmer months. Is the spot exchange rate (euro/RUB) likely to match this pattern?
What will be an ideal response?
No. If purchasers of Russia's petroleum expected the ruble to appreciate, they would purchase more rubles immediately, so the appreciation would be immediate and not coincide with the colder weather. The spot exchange rate is determined by the relative return and expected relative return on assets, which is affected by unexpected changes in the value of exports and imports.
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