The Russian ruble reached a three-week high against the U.S. dollar and the euro this week.
Despite economic uncertainties, the war in Ukraine, and economic sanctions from Western governments, the ruble has become one of the fastest-growing global currencies in the past month.
In mid-February, just before the Russian Federation invaded Ukraine, one U.S. dollar was worth 78 rubles. The Russian currency tanked at the end of February after the war started. At its lowest point, the exchange rate was 128 rubles to one U.S. dollar.
A little over 100 days later, the currency surged, peaking Wednesday at 55.5 rubles to one U.S. dollar, per Wall Street Journal data. This marks the ruble’s best performance in four years.
There are several reasons for the ruble’s recent strength, one being the interest rate reduction undertaken last week by Russia’s central bank. The key rate was reduced to 9.5%, matching pre-war levels.
According to Sberbank CIB analyst Yuri Popov, exporters also began selling foreign currencies at a higher rate to meet the country’s tax obligations, contributing to the increase.
Additionally, Popov said, the country began imposing a 30% service fee on Russian accounts with $1,000 or more in “currencies of unfriendly countries.” The term specifically refers to the U.S. dollar and the euro.
The Moscow Exchange also banned currency trading of the Swiss franc against the dollar and the euro on Tuesday. This followed Switzerland announcing economic sanctions against Russia late last week.
Ironically enough, Western sanctions are one of the most significant factors in the currency’s resurgence.
One indication of an economy’s strength is a positive trade balance. After Western governments and businesses stopped doing business with Russia in response to the war, imports to the country collapsed. However, exports remained largely unaffected.
The largest Russian exports are oil and natural gas, and the ruble’s strength in recent history has often been tied to the price of oil, which has skyrocketed. As of Friday, the price of a barrel of oil was roughly $116. When the war began in late February, it was just over $90.
Some European countries are so dependent on these exports that they are hurrying to import them before EU sanctions come into effect.
Many countries are working on alternate plans to replace Russian oil and fossil fuels, but these plans are not expected to take effect until the end of the year at the earliest.
According to a Finland-based Centre for Research on Energy and Clean Air think tank report, Russia received $97.4 billion in payments for fossil fuel sales during the first 100 days of the war in Ukraine.
India has imported 60 million barrels of Russian oil this year. This represents a fivefold increase from the 12 million they received last year.
The Prime Minister of Sri Lanka has also said his country could increase orders of Russian oil due to the worsening economic conditions faced by the island nation.
Last week, a Russian ambassador also met with the president-elect of the Philippines, Ferdinand Marcos Jr. They discussed oil and natural gas exports, although reportedly, no deal was reached.
As long as oil prices remain high, Russia’s currency will likely remain strong.