Unusual Situation as Russia’s Ruble bounces back as world best per fiat currency

[The Author]

The answer is natural resources here! Russia is a part of OPEC plus countries and has one of the biggest oil and gas reserves. So now America's dream is coming true when they see EUR is dropping faster than expected. Because that's was always the gameplan of US. Russia has told ass their buyer to pay in  Rubles and as a result their buyers have started selling their euros against Rubles to pay Russia for their oil and gas bills. As a result, EUR is standing at all time low and Russia is getting the benefits of strongest Rubble ever. US is happy because EUR is weakening and UK is happy to prove that Brexit was a correct decision.

So in order words, the current market condition favours US as they still remain above the UK in terms of financial stability?

[be.open]

EDIT: Yes, Russia limited by law the amount of RUB to USD you can exchange: https://www.washingtonpost.com/business/2022/03/08/ruble-dollar-exchange-barred/

This is a very old article from the beginning of March, the information in it is not up to date at the moment. Today, Putin canceled the mandatory sale of foreign exchange earnings for exporters, yesterday the Central Bank of Russia increased the export limit from $50,000 to $150,000. Russia is trying in every possible way to weaken the rapidly strengthening ruble, because it is unprofitable with a large positive trade balance. So far, it is not working out very well, apparently the Central Bank will again reduce the key rate in the near future.

Well, today the Central Bank of Russia lowered the key rate from 11 to 9.5%, let's see how effective this measure will be in order to stop the further strengthening of the ruble.

[davis196]

Well, today the Central Bank of Russia lowered the key rate from 11 to 9.5%, let's see how effective this measure will be in order to stop the further strengthening of the ruble.

Interest rates around 10% are considered pretty high. Having high interest rates in combination with a heavily regulated and manipulated currency market means that:
1.The national currency will have high value. Countries with higher interest rates have higher valued national currencies.
2.The national currency isn't fully convertible into foreign currencies, which means that the current market value isn't the actual value of that currency. Nobody knows the actual value of the Russian ruble.
I really wish the European Central bank to slowly raise the interest rates to levels around 10%, this would definitely make the euro more expensive, which might make the gas and oil import cheaper.

[Xylber]

Well, today the Central Bank of Russia lowered the key rate from 11 to 9.5%, let's see how effective this measure will be in order to stop the further strengthening of the ruble.

Interest rates around 10% are considered pretty high. Having high interest rates in combination with a heavily regulated and manipulated currency market means that:
1.The national currency will have high value. Countries with higher interest rates have higher valued national currencies.
2.The national currency isn't fully convertible into foreign currencies, which means that the current market value isn't the actual value of that currency. Nobody knows the actual value of the Russian ruble.
I really wish the European Central bank to slowly raise the interest rates to levels around 10%, this would definitely make the euro more expensive, which might make the gas and oil import cheaper.

Yes, 10% is high, they'll have devaluation and inflation. I agree on your analysis but not in the conclussion about the European Central Bank: the interest rates should be closer to zero to stop the climb on the prices and give back the purchase power to the people and companies.

I'm also of the opinnion of Nigel Farage: the European Central Bank has been given too much power.

[justdimin]

Interest rates around 10% are considered pretty high. Having high interest rates in combination with a heavily regulated and manipulated currency market means that:
1.The national currency will have high value. Countries with higher interest rates have higher valued national currencies.
2.The national currency isn't fully convertible into foreign currencies, which means that the current market value isn't the actual value of that currency. Nobody knows the actual value of the Russian ruble.
I really wish the European Central bank to slowly raise the interest rates to levels around 10%, this would definitely make the euro more expensive, which might make the gas and oil import cheaper.

Increasing the interest rate doesn't make it more valuable, it just makes it more "rare" compared to when it's low interest rate. However, it is not fully gone, it's there, the moment you drop the rates, the money will flood the markets all over again.

It's much better to not print more and more, that's what nations do and if you could stop doing that for a while, then other nations will keep doing it and yours will become more valuable, that's a bit more long term approach that would be better for every nation and would not have a bad side effect. The other parts I agree with, specially the EU one, they need to increase the rates very very quickly, 10% would be lovely and help everyone out.

[Sithara007]

Interest rates around 10% are considered pretty high. Having high interest rates in combination with a heavily regulated and manipulated currency market means that:
1.The national currency will have high value. Countries with higher interest rates have higher valued national currencies.
2.The national currency isn't fully convertible into foreign currencies, which means that the current market value isn't the actual value of that currency. Nobody knows the actual value of the Russian ruble.
I really wish the European Central bank to slowly raise the interest rates to levels around 10%, this would definitely make the euro more expensive, which might make the gas and oil import cheaper.

This is one of the issues that is fueling inflation in the EU Zone. The Euro has lost more than 15% of its value against the USD during the last 12 months. And I don't believe that the European Central Bank has the resources available to strengthen the Euro. After Brexit, the EU is too much dependent on Germany, and even that country is in bad shape right now due to high prices for energy. In the long run, I foresee the Euro getting devalued even more against the USD. And it is not just the Euro. Even JPY and GBP have gone down against the USD recently.

[Darker45]

Are American economists really baffled by this? Who are these American economists that the article is talking about?

Actually, this doesn't speak much of Russia's economy. Neither does it really speak much on the ruble. But this speaks a lot of how far Putin can go in order to make it appear as if the ruble is not falling down. There are extreme capital controls and other authoritarian steps that are currently being implemented by Kremlin in order to stop the freefall of the ruble.

Well, it's not so hard to implement knowing that power in the country only resides in a single person. But how long could this last? Surely, this isn't the sustainable way to have a working currency.

There's actually a similar discussion here.

[Sithara007]

The Russian central bank is now desperately trying to stop the Ruble from going up any further. For the federal government, the expenses need to be spent in Rubles and most of the revenues are in the form of Euro or US Dollar. If the Ruble goes up any further then the cushion that they enjoy as a result of the rising oil and gas prices will be lost. As of now, Ruble is trading at a rate of $1 = ₽57.50. I would say that a more acceptable exchange rate for the government would be somewhere between $1 = ₽65 to $1 = ₽70.

[be.open]

The Russian central bank is now desperately trying to stop the Ruble from going up any further. For the federal government, the expenses need to be spent in Rubles and most of the revenues are in the form of Euro or US Dollar. If the Ruble goes up any further then the cushion that they enjoy as a result of the rising oil and gas prices will be lost. As of now, Ruble is trading at a rate of $1 = ₽57.50. I would say that a more acceptable exchange rate for the government would be somewhere between $1 = ₽65 to $1 = ₽70.

The other day, the head of the Central Bank of Russia, Elvira Nabiullina, gave a big press conference, and I got the impression that Russia, under the pressure of strong external circumstances, has taken a trend towards a serious structural restructuring of its economy in order to stop unsuccessfully fighting the rapidly strengthening ruble, but rather try to benefit from it . The Russian economy has a chronic lack of money supply and it seems that now this can be corrected without the risk of a surge in inflation. Let's see, at least now we can confidently say that Russia successfully withstood the sanctions shock and was able to withstand the blow, which, according to the West, should have destroyed it. Of course, there are difficulties and the negative consequences of the sanctions will still manifest themselves, but in fact the reality turned out to be much better than the most optimistic expectations.

[Poker Player]

I find this thread interesting because at the time I created one that I titled: "The ruble is going to hell" and ended up editing the title:

The ruble is going to hell (not anymore?)


Doing a search I see that, indeed, today the ruble is stronger against the USD and the Euro than before the conflict.

It can't be all joy, however, as it is not in the interest of an exporting power to have a currency that is too strong, as Sithara007 comments, but it seems that the move has not gone completely wrong for Putin.

The currency I do not see a very bright future for is the Euro, with the fiscal deficits of some countries, especially in the south, the energy policy, the insatiable voracity of regulation, etc.

[so98nn]

I was a little amused by the title of the topic. But later, I found an explanation and the correct link from where the OP got this news.
https://news.bitcoin.com/american-economists-are-baffled-by-an-unusual-situation-as-russias-ruble-is-the-worlds-best-performing-fiat-currency/
But my opinion suggests that apparently, six packages of sanctions are too few for Russia; a seventh is needed, and if possible, several more, so that we can stop being surprised at the extreme survival of this country.

Sanctions coming from the US will surely affect Russia and is doing the same currently. However, how many of them really against Russia? There is still eastern hemisphere whose relying on the Russian resources such as crude oil, grains, vegetables and few other things. This means huge income still flowing into and outside Russia irrespective of sanctions imposed by westerners.

Ruble recently dumped, but it was getting stronger since a week. The money is still getting exchanged like old days and even though they are at war, they have money and they are more than surviving.

[DrBeer]

The Russian central bank is now desperately trying to stop the Ruble from going up any further. For the federal government, the expenses need to be spent in Rubles and most of the revenues are in the form of Euro or US Dollar. If the Ruble goes up any further then the cushion that they enjoy as a result of the rising oil and gas prices will be lost. As of now, Ruble is trading at a rate of $1 = ₽57.50. I would say that a more acceptable exchange rate for the government would be somewhere between $1 = ₽65 to $1 = ₽70.

A little earlier, I already wrote how Russia drove itself into a stalemate with the ruble.
Russia's problem is that Russia, due to a rather backward economy, is highly dependent on the import of technology, goods and services. To buy all this, you need a huge amount of currency. And the main inflow of currency gives only gas and oil. This creates a paradox:
- a strong ruble is more a game for the public, they say, that's how stable we are. At the same time, import prices should also decrease, but this is not happening. And it won't happen. Because this "stability" is also fake. But at the same time, a severe drawdown of budget revenues begins, which is drawn up and counted in rubles. More expensive than the ruble - the budget will receive less than the ruble, after the sale of foreign exchange earnings. I have already cited data from the Russian budget, which export-dependent income items have decreased and by how much due to the "stability of the ruble."
- real ruble, i.e. cheap - of course, it will make the budget not only not in deficit, but even in surplus! But this means wild inflation, rising prices, falling incomes. The need to receive even more currency, despite the fact that there are no additional sources, and the existing flows are already decreasing, i.e. oil that has fallen under sanctions is bought by China and India at a dumping price of about $40 per barrel, but not $100+ on the market or $70+ as it is budgeted for in Russia!

Although Putin, with his own mouth, voiced the "new economic theory" that the cheap ruble is a net benefit to everyone, and by itself speaks of the stability of the economy

No, I understand that Putin and the company are not idiots, and do not store their stolen wealth in the ruble. Dollar, euro, and of course in European or American banks. But what about 100+ million people? As always, "you have to be patient! you need a breakthrough! There is no money, all the best to you"?