Two months after the Russian ruble fell below US$1, the fiat currency of this transcontinental country is the best performing currency in the world. U.S. economists are puzzled by the “unusual situation” because countries facing severe sanctions usually see their fiat currencies depreciate in value, but the exact opposite is true for the Russian ruble.
Russian ruble outperforms euro and dollar – Transcontinental country’s fiat currency shows resilience
On February 28, 2022, Bitcoin.com News reported that the Russian ruble sank to record lows and citizens began withdrawing a lot of cash, causing what many reports called a “bank run.” At the time, Russia was under severe financial sanctions from countries opposed to the war in Ukraine. In addition, the United States, the European Commission, and Western allies had placed restrictions on the international reserves of Russian banks.
However, in the second week of April 2022, Bitcoin.com News reported that the country’s central bank had cut interest rates and pegged the ruble to gold. At the time, Russia’s central bank pegged the price of the ruble to 5,000 rubles for a gram of gold. Russia also made sure that “unfriendly” countries were forced to pay for gas in rubles. Numerous foreign buyers followed this rule and paid for petroleum products in rubles. The country’s central bank also lowered theandRussia’s benchmark bank rate also
That week in April, the Russian ruble rebounded to pre-war levels, and fiat money has shown resilience ever since. VariousWestern media headlineshave appeared recently. Western media indicate that the Russian ruble is the best performing fiat currency in the world today. In an interview with CBS, Jeffrey Frankel, professor of capital formation and growth at the Harvard Kennedy School, said that the ruble’s rise “is an extraordinary situation” (33). The ruble is at record highs against the euro and the U.S. dollar in the eurozone.
Tatiana Orlova, chief emerging markets economist at Oxford Economics, attributed the ruble’s resilience to rising commodity prices in the same report. Orlova explained, “Commodity prices are currently soaring, and even though embargoes and sanctions have reduced Russian exports, rising commodity prices will more than compensate for these declines.” Orlova further elaborated to CBS that there is a large discrepancy between exports and imports in Russia. The Oxford University economist added:
There is this coincidence that exports are surging while imports are collapsing.
Orlova also described the capital controls implemented by the Russian central bank and how foreign holders of stocks and bonds cannot earn dividends internationally. The Oxford University economist concluded, “Once an important source of currency outflows from Russia, that channel is now closed.”
Meanwhile, in the United States, the Biden administration is struggling with hot inflation, and according to a report by New York Times contributors Zoran Canoyongus and Gina Smialekthe president is having trouble discussing the issue. Biden claims that “America is in a stronger economic position today than any other country in the world”. Biden continues to blame Russian President Vladimir Putin for raising gas prices in the U.S.,calling it a“Putin price hike.”
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