Russian ruble, which was rumored to be in a crisis of national bankruptcy, is showing strong performance in the U.S. foreign exchange market. The background is adding to the curiosity.
In the aftermath of the U.S. Federal Reserve’s tightening monetary policy, major currencies around the world, including the Korean won, the euro, the Swiss franc, and the Chinese yuan, are weakening, while the ruble is reversing alone.
According to CNBC and Bloomberg on the 23rd (local time), the value of the ruble hit the highest price in seven years against the dollar on the 22nd, a day earlier. It recorded 52.3 rubles during the day, up 1.3% from the previous day. This is the highest in seven years since May 2015. On the 23rd, 54.4 Russian ruble were weaker than the previous day, but they are still high.
The ruble exchange rate per dollar soared to 138.9 rubles on March 7 as Russia’s invasion of Ukraine (February 24 this year) began and the International Association for Interbank Communications (SWIFT) expelled Russia. However, it calmed down after the Russian central bank’s intervention and fell below 100 rubles at the end of March, and fell in April and May due to doubts about the effect of sanctions. Regarding the fall in the exchange rate, the Kremlin also argued that it was evidence that Western sanctions were not working.
The biggest reason is soaring international energy prices. Brent crude, an international oil benchmark, rose about 60% in a year. Russia has significantly increased exports to China and India by selling Ural oil at low prices to avoid U.S. and European Union sanctions. According to the Finland Center for Energy and Clean Air Research (CREA), Russia earned 93 billion euros (125.31 trillion won) in fossil fuel exports for 100 days after the opening of the war.
Max Hess, a researcher at the U.S. Foreign Policy Research Institute, explained, “The surge in the value of the ruble is due to Russia’s record current account surplus through energy exports.” According to Russia’s central bank, Russia’s current account surplus slightly exceeded 110 billion dollars from January to May this year. This is more than 3.5 times more than the same period last year.
Strict capital controls, such as the government restricting foreign exchange outflows, also lowered the exchange rate. Recently, the Russian government has partially eased capital controls on whether the strong domestic currency will damage finances, including weakening export competitiveness.