Economists Baffled by ‘Unusual Situation’: Russian Ruble Is World’s Best Performing Fiat Currency | Russia

Two months after the Russian ruble fell below a US penny, the ruble is now the best performing currency in the world. Economists are baffled by this “unusual situation“, because a country under heavy sanctions usually sees its currency lose value, but the Russian ruble has done the exact opposite.

Russian Ruble Surpasses Euro and Dollar – Russian Currency Shows Resilience.

On February 28, 2022, the Russian ruble had bottomed out, and citizens began withdrawing a lot of cash, causing what many reports called a “bank run“. At the time, Russia was being hit with tough financial sanctions from countries opposed to the war in Ukraine. In addition, the United States, the European Commission and Western allies imposed restrictions on the Bank of Russia’s international reserves.

However, in the second week of April 2022, the country’s central bank had cut rates and pegged the ruble to gold. At the time, the Russian central bank set the price of the RUB at 5,000 rubles for one gram of gold. Russia has also made sure that the countries “unfriendly” are forced to pay for their gas with the rouble. Many international buyers comply with this rule and pay for petroleum products in rubles. The country’s central bank also lowered Russia’s benchmark bank rate.

This week in April, the Russian ruble rebounded back to pre-war levels and fiat currency has shown resilience since then. In recent times, various Western media headlines have shown that the Russian ruble is the best performing fiat currency in the world. Speaking on a US channel, Harvard professor Jeffrey Frankel remarked that “the situation is unusual” regarding the rise of the ruble. The ruble recorded record highs against the euro zone euro and the US dollar.

In the same report, Tatiana Orlova, an economist at Oxford Economics, said the rise in commodity prices was attributed to the resistance of the rouble. “Commodity prices are currently very high, and even though there is a decline in the volume of Russian exports due to embargoes and sanctions, rising commodity prices are more than offsetting these declines.“, Ms. Orlova explained. The Oxford economist added:

We have this coincidence that while imports are collapsing, exports are booming.

Tatiana Orlova also spoke about the capital controls put in place by the Russian central bank and how foreign holders of stocks and bonds cannot reap dividends internationally. “It was a fairly large source of currency outflow from Russia – now this channel is closed“, concluded the Oxford economist.

Meanwhile, in the United States, the Biden administration is grappling with high inflation and the president is struggling to discuss the issue, according to a report by New York Times contributors Zolan Kanno-Youngs and Jeanna Smialek. Biden claims that “America is in a stronger economic position today than any other country in the world.” Mr Biden continues to accuse Russian President Vladimir Putin of being responsible for the rise in gasoline prices in the United States, which he calls the “Putin’s price hike“.

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