- The Ukrainian invasion and the West’s sanctions plunged the ruble by 40%, but the Russian currency rebounded massively to seven-year highs.
- For now, the ruble remains strong, and RCB tries to weaken the currency as it might hurt exports.
- Dan Ashmore argues that the ruble’s strength is fake, though it confirms the failure of the monetary sanctions against the nation.
Indeed, the United States dollar has been outshining other currencies. Though the dollar could have crushed more than commodities and goods amidst surging inflation, it has been strong compared to other fiats. The DXY (dollar index), which weighs the USD again other foreign currencies, gained 9% in 2022.
It’s somewhat staggering that the Russian ruble touched 7-year highs against the dollar last week despite the USD’s stout. That comes after the West introduced stiff sanctions against the nation to weaken the ruble beyond measures.
You probably remember Joe Biden (in March) saying that the unprecedented sanctions would reduce the Russian ruble to rubble.
Though the ruble initially experienced heat following the updated monetary policy, the price charts confirm the currency recorded a significant rebound. The ruble plunged by 46% in 12 days as Russia launched the military operation in Ukraine on February 24.
One dollar could fetch you 139 rubles then. However, it has recorded a massive rally, gaining 38% this year to its current level at 54 Russian rubles per dollar.
Why Ruble Strengthened
The surging gas prices saw Russia raking impressive profits. That remains sad and ironic that most of this comes from the EU, which has been hammering Putin’s nation with sanctions. Though Europe wants to reduce this dependence, it will take time to (economically) switch its oil imports.
Capital Controls & Sanctions
Besides oil, there are sanctions.
Surprisingly, the imposed sanctions aid here. Russians can’t import similar goods as previously because of sanctions, translating to fewer rubles sent overseas, bolstering the foreign exchange rate. However, some analysts believe the ruble’s strength in an engineered Forex rate and fake.
For instance, no one is trading the currency despite its strength. Trading rubles has significant barriers at the moment. What’s the essence of the currency’s strength, and traders can’t trade it with ease? Moreover, Russians cannot freely use it to import goods.