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Russian Ruble Trades at a Two-Year High at 0.01 on Rate Cuts

The Russian Ruble trades at 0.01506, at two-year highs. The Russian economy is under tremendous pressure as the war against Ukraine continues.

Russian Ruble at 0.01506 Against the US Dollar

The Ruble has strengthened to levels last seen in 2020. The Ruble is the strongest currency after the US Dollar. It has surged almost 150% after it dropped to life lows in March 2022, when it first began its attack on Ukraine.

The Ruble dropped below one US penny when the western countries raised sanctions on Russia. Currently, the RUB/USD closed at 0.0150 for the week ended May 27, 2022.

RUB/USD At 2-Year High
RUB/USD At 2-Year High

Russian Central Bank Lowers Rates

The Russian central bank has lowered interest rates. Rates have come down from 14% to 11%. It has made the currency unattractive as an investment. The Ruble value against the Dollar fell when the central bank raised interest rates. Exports have become costly, and import costs have come down.

Inflation in Russia is high. The economy has weakened with the soaring prices. The country has lost life and property with the counter-attack from Ukraine. Despite warnings from several countries, the Russian military continues to invade and bomb various parts of Ukraine.

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The Dollar against the Ruble surged to 158 in March 2022. The currency pair is now trading at almost half the value at 66.5 levels. Russia is taking measures to control the outward flow of its currency. It has kept the Ruble resilient against the Dollar.

Western Sanctions on Russia

Countries have raised sanctions against Russia after it invaded Ukraine. But the Russian Ruble continues to strengthen.

After the sanctions raised by the western countries, many businesses have left the country. It led to a drop in imports, leading to a comparative hike in exports. Europe depends on Russia for its crude supply. The EU is forming new strategies to cut down its high imports from Russia. Russian

Foreign businesses are finding it tough to sell their investments and exit from Russia. Most companies are searching for ways to leave Russia, which may severely impact the Russian economy. Analysts predict that almost a decade of economic growth will be wiped out.

The government is being vigilant about a capital flight to retain its currency value. However, the strengthening Russian Ruble is drawing the economy lower.

Commodity Prices Soar

The Russian war on Ukraine has resulted in a drop in the export of commodities like wheat, crude, and natural gas from Russia to other countries. A break in the commodities supply chain has led to a surge in prices. Commodity prices have soared, and high inflation has hit the economy of many countries like the US, the UK, and the EU.

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The US inflation is at a 40-year high. The Fed has hiked interest rates to control inflation.

The UK economy is hit by high inflation and the cost-of-living crisis. People in Britain are worried about paying huge bills. The vulnerable sections of society are affected by soaring inflation. Inflation is the highest in decades, says the British Finance Minister Rishi Sunak.

The EU has annual inflation of 7.5% in April. It is the highest since 1997. Skyrocketing energy prices and commodity prices have resulted in soaring inflation.

The drop in the export value of commodities from Russia has resulted in high commodity prices. Ukraine and Russia are the chief exporters of food grains like wheat and sunflower oil. Russia exports a huge quantity of crude oil and natural gas to countries like the United Kingdom and the European Union.

The sudden disruption in the supply chain of crude oil and wheat has led to a sharp surge in inflation in countries. Most countries are yet to recover from the lockdown restrictions brought by the covid pandemic as demand came down and production decreased. The war has further weakened the economies of major countries.

Demand for Payment in Ruble

Russian President took steps to curb the falling Ruble prices by demanding payment for its energy exports in Rubles. It pulled up the falling Ruble prices immediately. Foreign buyers had to pay in Rubles for their energy imports from Russia. The value of the Russian Ruble shot up with the curbs by the government to control the downward spiral in currency value.

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Russia benefits from its strong oil supply, which keeps its exports high.

US Dollar Slides

The US Dollar slides for the second week and closed for the week ended May 27 at 101.69. The Dollar, which surged to a two-decade high of 105, shed most of its gains after the Fed hiked rates.  Inflation is high, and commodity prices are some concerns that the Fed hopes to address through rate hikes.

Investors expect the Fed to raise hikes again in its June policy meetings to tame inflation.

 

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