The rise of the Russian ruble has less to do with a rise in confidence in the currency and more with the Central Bank of Russia’s economic maneuvers and the establishment of capital controls amid the ongoing conflict.
The Russian Ruble Is 2025’s Best-Performing Currency. But Why?
According to Bank of America, the Russian ruble has been experiencing a sensational year, becoming this year’s best-performing currency to date. Russia’s fiat currency has been recovering ground against the U.S. dollar since January, when the exchange rate hovered around 110 rubles per dollar. Now, the exchange rate is around 80 rubles per dollar, a sharp recovery in a short period.
Nonetheless, the reason behind this is not related to a renewed trust in the country’s future. Instead, it has to do with a series of measures that the Central Bank of Russia has implemented to maintain this balance in the context of global sanctions against Russia.
Brendan McKenna, international economist and foreign exchange strategist at Wells Fargo, stated that there are three reasons for this development. Talking to CNBC, he stated:
The central bank has opted to keep rates relatively elevated, capital controls and other FX restrictions have tightened a bit, and [there’s been] some progress or attempt at progress in finding a peace between Russia and Ukraine.
In spite of this, analysts assess that the rally could fade in the upcoming months as Russia faces an income reduction as oil prices fall. Renaissance Capital’s economist Andrei Melaschenko noted that this might affect the exchange rate. “Oil prices have fallen significantly, which should be reflected in a decrease in export revenue and the sale of its foreign currency component,” he stressed.
Also, if a peace agreement is reached, the current controls would be lifted, directly affecting the performance of the ruble. “Ruble can selloff pretty rapidly going forward, especially if a peace or ceasefire is reached,” McKenna added.
Conversely, Russian analysts claim that the ruble is still undervalued and can regain even more ground in the long term.
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