How the Rouble Became the Best-Performing Foreign Currency of 2022
The Russian rouble has seen the highest gains of any foreign currency during the first half of 2022, according to recent reports from Reuters.
Rouble Hits Two-Year Highs
The rouble was priced at 65.50 against the dollar on Sunday, May 15. It saw similar prices when compared against other currencies: it was priced at 68.15 against the euro and at 80.27 against the British pound on the same date.
Those numbers roughly mark a two-year high, with prices not seen since February 2020 and June 2020 for the euro and the dollar respectively.
In terms of percent change, the rouble saw year-to-date growth of 12.5%. The only other major foreign currencies that performed nearly as well were the Brazilian real, which saw its price increase by 10.1%, and the Mexican peso, which saw its price grow by 2%.
What Caused the Rouble to Rise?
In a statement on Thursday, May 12, Russian president Vladimir Putin affirmed that the rouble has become the best-performing currency of the year. He also claimed that the rouble’s strength is an example of Russia’s sound performance under western sanctions, which were imposed as retaliation against the country’s invasion of Ukraine.
More broadly, the rouble’s price rally can be attributed to growing demand within Russia’s exports industry along with low demand for foreign trade.
Additionally, financial restrictions could prevent existing roubles from entering trading markets, and the resulting scarcity could keep the value of the rouble high. In recent months, Russian citizens have been blocked from transferring money abroad, Russian businesses have been required to convert 80% of overseas profits into roubles.
Finally, Russia’s invasion of Ukraine brought the value of the rouble down by nearly 50% in early March. Those initial losses allowed the currency to recover once the initial shock wore off, bringing it to its current market value.
Losses Could Come Later This Year
Despite the rouble’s success this year, not all statistics are positive. Reuters suggests that Russian banks are not trading at the above rates.
Additionally, Reuters warned that increasing imports within Russia could cause downward pressure on the asset. The Russian government has created a list of goods that will be allowed under a “parallel imports” plan in an attempt to counteract western sanctions.
That trend could make the rouble weaker against the dollar once again. However, given the rouble’s rapid price swings this year, it is difficult to say what the coming months may bring.
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