Amidst the current war Russia is waging in Ukraine, its currency, the Russian Ruble, has been performing impressively. As of the writing of this article, it is currently the world’s number one currency in terms of Year-to-Date (YTD) returns. A status the country is very proud to announce on its numerous news outlet and publication.

How Russia Boosted its Currency

The main driver of the ruble’s rally was brought by a combination of monetary and fiscal policies the country implemented during the war. Most notable among these are the numerous capital controls Russia has imposed to try and offset some of the pressure from multiple countries, particularly western nations such as the United States and those belonging to the European Union (EU).

Despite backlash from the multiple “breach of contracts” with its trading partners, Russia infamously required the latter, predominantly European countries, to pay in ruble instead of US dollars or Euros for their importation of Russia’s natural gas supplies. By doing this, it created an artificial demand for the ruble. At the same time, the importing countries were forced to sell their foreign-exchange holdings against their balance sheet.

Russia also barred foreign investors from selling their equity positions in the country’s financial market to reduce the heavy dollar outflow from the country. On top of these, it also limits foreign currency withdrawals that its citizen can do on their respective foreign currency accounts. Lastly, Russia also announced that it would pay its foreign debts in rubles instead of other currencies.

Russian Ruble Price Analysis

Russian Rubble / US Dollar Chart

When Russia declared its “Special Military Operation” in Ukraine on the 24th of February, 2022, its currency went down by more than 46% from the start of the invasion to its lowest point on the 7th of March.

Today, the 16th of May. Since the invasion started, the Russian Ruble has been up by more than 28%. Meanwhile, its Year-to-Date (YTD) has been up by more than 17% since the beginning of the year 2020. Almost three months from the start of the invasion, despite the plethora of sanctions the world has imposed on Russia, the Russian Ruble is currently the undisputed top-performing currency globally.

Moving Forward

Despite the current optimism about the Russian Ruble, it is crucial to understand that Russia’s currency is only one of the elements that define the economic situation in the country. Moreover, economists still forecast a looming recession later this year, which may plague the Russian economy for years to come. Lastly, as history has shown, global sanctions take at least two to three years to fully materialize the intended effect of these sanctions on the country, in this case, Russia. Hence, Russia will feel the extreme pressure brought by the real impact of a full-blown recession in the years to come.