CBS News reports that the Russian ruble has outperformed all other currencies this year. After the harshest sanctions in modern history, the Russian currency has climbed 40 percent against the U.S. dollar this year.
Jeffrey Frankel, professor of capital formation and growth at the Harvard Kennedy School, said, “It’s an unusual situation.”
On Monday, May 23, the Russian ruble hit a seven-year high against the Euro after rising over six percent to 58.68 rubles per Euro. The Russian currency also gained four percent against the U.S. dollar.
By 1338 GMT (Greenwich Mean Time), the ruble was up by 6.3 percent, trading at 58.75 against the Euro, the strongest since June 2015. Meanwhile, as of last Friday, it was 4.6 percent stronger against the dollar, the strongest since March 2018.
One reason for this is that capital controls have boosted the ruble’s value against other currencies. Additionally, high oil prices have been a factor.
Moscow initially praised the ruble’s appreciation, but now the advancement is causing government worries as the surge bites into exporter competitiveness and budget revenue on commodities sold abroad.
Reuters reports that according to the Vedomosti Daily, the Russian central bank has started to buy foreign currency to stop the ruble’s out-of-control strengthening. The central bank denies this.
Analysts at Promsvyazbank point out that if the central bank were doing this, the effect on the currency would be more noticeable and probably weaken the ruble.
According to Reuters, analysts at Tinkoff Investments believe that the ruble may strengthen further, at least in the medium term. However, the exchange rate may stabilize by autumn, particularly if imports recover and restrictions are lifted.
Analysts at Otkritie Bank think the ruble may reach 55 to the dollar in the next few weeks but may weaken to 70-80 by the end of the year.