The ruble has dropped everyone this year

The ruble began to strengthen again in the middle of the week after the Moscow Stock Exchange opened after a two-day hiatus, bringing its exchange rate up 11 percent against the dollar since the beginning of the year. It also overtaken the Brazilian real and became the best-performing major currency out of 31 whose exchange rate is regularly followed by Bloomberg, writes news agency. The offshore ruble has risen slightly more.

Russia’s foreign exchange gains this year are largely due to the Russian government’s introduction of a lot of austerity measures to protect the exchange rate after Western countries imposed severe sanctions on the Russian economy in response to the country’s military aggression against Ukraine. The first reaction to this was the spectacular deep flight of the Russian currency. The most important restrictive measure was that Moscow forced exporters to sell their existing foreign exchange reserves and accept payment in rubles only for deliveries, including natural gas.

The exchange rate of the Russian ruble and the Brazilian real dollar


At the same time, according to some of the experts interviewed, the strengthening of the ruble does not completely cover the reality, as many foreign exchange trading companies have suspended trading in Russian currency, which is why it is not possible to do foreign exchange trading in reality. Nevertheless, the role of the ruble is unique, as countries that have introduced similar capital restrictions in the past have failed to take similar measures to prevent their currencies from weakening. Argentina and Turkey are good examples of this in recent years, where the peso and lira have plummeted to new lows and have not recovered. At the same time, the latter two countries have not been subject to any type of sanctions that would have virtually eliminated imports into the country, and their foreign trade balance has not been massively positive in one fell swoop.

The change in Brazilian monetary policy also played a role in the ruble’s ability to take the lead. After the key interest rate was raised by 1,075 per cent in early 2021, the country’s monetary policy policymakers have indicated that they will slow down the pace of increases and even end the tightening cycle soon. A couple of the interest rate differential between the dollar and the real will remain quite high anyway, but it could continue to narrow with the US Fed also raising interest rates.


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