Although Russia marks a historic default on its debt, the nation’s currency is gaining strength. The Russian ruble bounced back in trading at the end of December 2022. It hit a new high against the dollar in some periods, continuing its streak as the best-performing currency in the world this year.

Russian Ruble

The context of an increasing Russian ruble

Three months after the ruble’s value plummeted to less than a US penny due to the most severe economic sanctions placed on a country in modern history, Russia’s currency has staged a surprising comeback.

The rouble had gained 3.4% to trade at 73.42 versus the euro. It firmed 2.9% against the yuan to 9.89 after Russia said it had doubled the yuan’s maximum possible share in its National Wealth Fund (NWF) to 60% as it restructured its rainy-day fund to reduce dependency on currencies from so-called “unfriendly” nations.

This comes after fears over the impact of a Western oil price cap on Russia’s export revenues dominated this month’s trading.

According to the proposed price cap, countries outside the EU will be able to purchase Russian crude oil.However, shipping, insurance, and reinsurance firms will have to discontinue offering their services if the contract price rises above the $60 per barrel cap.

Russian Ruble
 National flag flies over the Russian Central Bank headquarters in Moscow, Russia May 27, 2022. REUTERS/Maxim Shemetov

According to Reuters, Russia’s Urals oil exports could fall by up to 20% in December.Moscow cannot entirely rely on other markets, particularly the two major Asian customers, China and India. Russia is still having trouble locating sufficient and suitable ships.

The cost of Russian Urals crude oil has significantly decreased as of December. India, for example, can purchase petroleum shipments from Russia for a lot less than the $60 cap.

The recovery in imports, according to the Russian Ministry of Finance, is a factor in the ruble’s recent depreciation. The demand for foreign currency will rise as imports rise, which will lower the value of the home currency relative to the foreign currency.

Specific datum’ Russian ruble

Normally, when a country faces international sanctions and a large military conflict, investors run and capital flows out, leading its currency to fall. However, Russia’s extraordinarily harsh steps to keep money out of the country, along with a significant surge in fossil-fuel costs, are creating demand for the ruble and pushing up its value.

As a result, the Russian ruble soon recovered following a week of significant falls. The ruble increased more than 2.8% versus the USD in the opening trading session of the week, reaching 68.31 rubles to 1 USD.

When compared to the euro, the Russian ruble increased by 4.4%, hitting 72.4 rubles. To 9.71 rubles for 1 yuan, the currency increased 2.1% in value.

To sum up, the ruble’s rapid resilience means that Russia is partially shielded from the harsh economic sanctions imposed by Western nations following its invasion of Ukraine, but how long that shield will continue is unknown.

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