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A Russian ruble piece with an American dollar ticket and a quarter of a quarter of a dollar in Moscow on October 10, 2023.
Alexander Nemenov | AFP | Getty images
In the midst of a long -term war, down the prices of petroleum, rigid sanctions and an economy that is downhill, Russia ruble increased.
In fact, it is the most efficient currency in the world so far this year, according to Bank of America, with gains of more than 40%. The amazing rally of the ruble in 2025 marks a net reversal of the last two years, when the currency had stood out dramatically.
What propels the Russian currency?
The strength of the ruble has less to do with a sudden leap in the confidence of foreign investors than with capital controls and the tightening of policies, said market observers at CNBC. The weakness of the dollar is an additional bonus.
Brendan McKenna, international economist and exchange strategist at Wells Fargo, lists three reasons for the Rouble du Rouble. “The central bank has chosen to maintain relatively high rates, capital checks and other FX restrictions have tightened a bit, and [there’s been] Some progress or try to progress to find a peace between Russia and Ukraine. “”
The Central Bank of Russia has maintained a restrictive position to reduce high inflationkeep a domestic High interest rate at 20% and tightening of credit. High borrowing costs are dissuade local businesses Importing goods, in turn reducing the request for foreign currency among Russian companies and consumers, said industry observers.
There has been a drop in the demand for foreign currency from local importers, given low consumption, said Andrei Melaschenko, an economist with capital Renaissance. This drop gave a boost to the ruble because the banks do not need to sell rubles to buy the dollar or the yuan.
In the first quarter of 2025, there was a “stay” in consumer electronics, cars and trucks that were actively imported into the second half of last year in anticipation of the increase in import duties, said the economist based in Moscow. The recharge time of consumer activity was mainly in the sustainable products sector, which constituted an important part of imports from RussiaSaid Melaschenko.
In addition, Russian exporters must convert payment to dollars into rubles, increasing the demand for money. Importers, on the other hand, have reduced the purchase of foreign products, and therefore do not need to sell rubles to pay in dollars.
The Russian government demands that large exporters brought back part of their foreign income in the country and exchange them for rubles on the local market. In particular, the petroleum industry has transformed foreign income into rubles, analysts said.
Between January and April, the Sales of foreign currency By the largest exporters in Russia totaled $ 42.5 billion, CBR data showed. It is almost a jum of 6% compared to the four months before January.
The CBR in reduction in money mass also supports the ruble, said Steve Hanke, professor of economics applied at Johns Hopkins University.
In August 2023, the money growth rate created by the CBR rose 23.9% per year, he said. This figure has become negative since January – currently contracting at a rate of -1.19% per year, said Hanke.
In addition, the hopes of a peace agreement between Ukraine and Russia following the election of US President Donald Trump had also triggered some optimism, said McKenna de Wells Fargo. The expectations of the reintegration of Russia in the economy have returned certain capital flows to the assets denominated by the ruble, despite the capital controls, which supported the strength of money to a certain extent.
Is the rally sustainable?
Despite the current force of the ruble, analysts warn that it may not be durable. Oil prices – a large pillar of Russia’s export economy – have dropped considerably this year, which could weigh on FX entries.
“We believe that the ruble is close to its maximum and could start to weaken in the near future,” said Melaschenko. “Oil prices have dropped considerably, which should be reflected in a decrease in export income and the sale of its foreign currency component,” he added.
While the peace talks between Russia and Ukraine have recently not exploited concrete developments, McKenna also noted that a concrete peace agreement could erode the ruble force because the controls such as the FX restrictions which supported the currency could be lifted.
“The ruble can be sold fairly quickly in the future, especially if a peace or a cease-fire is reached,” he said.
“In this scenario, capital checks are probably completely raised and the central bank could reduce rates fairly quickly,” he added.
Economic compromise
Exporters also see thinner margins, noted industry analysts, in particular the country’s oil sector in the context of the drop in world oil prices. The government also feels pressure – lower oil prices combined with a stronger ruble eroded oil and gas revenues.
Government finances are Very sensitive to fluctuations in raw pricesPetroleum and gas profits representing approximately 30% of federal income in 2024, according to Heli Simola, principal economist at the Bank of Finland.
“The Ministry of Finance was forced to look more at the National Social Protection Fund to cover expenses,” said Melaschenko. “And there may be other discounts of non-prone expenditure if this trend continues.”
That said, apart from the oil trade, Russia has been mainly isolated from the world market. “The meaning, a lower friction does not add much to the commercial competitiveness of Russia,” said McKenna.
