The Russian currency Ruble emerged as the best performing major currency against the US dollar this year, up 45% since January. This unexpected force has caught Russian officials off guard and is posing a challenge to the country’s war-hit economy. The currency is now trading around 78 per dollar, similar to levels before Russia’s invasion of Ukraine, as reported by the Economic Times.The increase is due to various factors. Russians are buying less foreign currency due to international sanctions. High interest rates have also made investments in rubles more attractive to locals. The central bank kept interest rates very high from October last year to June this year, before cutting them by 5 points to 16 percent.This strong performance exceeds government expectations, which forecast an average rate of 91.2 per dollar for the year. The ruble has remained strong despite lower oil prices and new sanctions from the US and Europe. This force actually causes problems by decreasing the value of export earnings when converted into rubles.The Bank of Russia supports the currency by selling foreign currencies, especially the yuan and gold, from the National Welfare Fund. This helps offset declining energy revenues, with oil and gas revenues down 22% in the first eleven months of 2023.The ruble’s impressive performance ranks it among the five best-performing assets in the world this year, alongside precious metals such as platinum, silver, palladium and gold. Central bank governor Elvira Nabiullina sees this force as useful in fighting inflation, noting that the positive effects on prices have not yet peaked.
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