The ruble reaffirmed its unusual position as the world’s best-performing currency this week, surging to multiyear highs. The ruble has roared back after plummeting in the weeks after Russia’s invasion of Ukraine, which provoked broad international sanctions aimed at damaging the Russian economy.

It reached its highest level versus the US dollar since June 2015 on Tuesday. It has risen over 35% this year, outperforming every major currency, and has more than quadrupled from its post-invasion low.

Although Russia’s economy has outperformed expectations, the prognosis is bleak, with double-digit inflation and most experts forecasting a devastating recession. However, capital limitations implemented by its central bank, such as forcing exporters to convert a portion of their revenues into rubles, have fuelled demand for the Russian currency.

Higher revenues from oil and gas exports have kept the ruble strong as prices climb and demand in Asia compensates for cuts in Europe. At the same time, Russian imports have declined substantially, owing in part to the withdrawal of numerous international enterprises from Russia, which also supports the ruble.

After the invasion, the ruble fell to its lowest level against the dollar in late February, and Russia’s central bank more than quadrupled interest rates to 20 percent as part of its efforts to stem the exodus of rubles from the economy. Some limitations have now been relaxed, and rates have been reduced to 9.5 percent, where they were before the invasion. However, the ruble continues to rise, which helps to reduce inflation but also puts strain on Russia’s budget, which is heavily reliant on oil sales, which are often denominated in dollars.

Source: The New York Times

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