After facing various pressures from Western countries, the Russian currency, the ruble turned out to be more resilient by strengthening at a 7-year high.
Revealing the events during the beginning of the Russian invasion of Ukraine in late February this year, the ruble has plunged sharply to an all -time low of 139 against the US dollar.
Today, however, the currency bounced back stronger to trade at 52.30 against the USD, the strongest level since May 2015.
What happen?
A two -fold increase in interest rates
Russia’s central bank had doubled its interest rate to 20% from 9.5%, before lowering it threefold to 11% at the end of May over concerns it would hurt its exports.
High energy prices
Western sanctions on Russia have caused energy prices to soar. The European Union (EU) still buys billions of dollars of energy from Russia every week despite at the same time trying to impose sanctions.
Although many Western countries restricted Russian oil purchases, Moscow still recorded profits amid a surge in crude oil.
Strict capital controls
The government restricts foreign currency leaving its country and because of that Russia cannot import goods from abroad due to restrictions.
This means it spends less of its money on giving away foreign goods.
Does this reflect the real Russian economy?
Not that easy. Analysts see the strength of the ruble linked to a surplus in the overall balance of payments, which is more driven by exogenous factors linked to sanctions, commodity prices and policy measures than to long -term macroeconomic trends and fundamentals.
Russia's Ministry of Economy expects that by mid -May, unemployment will reach almost 7% this year.
Since the Russian war in Ukraine, thousands of companies have left Russia. Foreign investment has declined significantly and poverty has nearly doubled in just the first five weeks of the war alone, according to Russia’s federal statistics agency Rosstat.
