Two months after the Russian ruble fell below the US penny, the transcontinental country’s fiat currency has become the world’s best-performing currency. American economists are baffled by the “unusual situation” because a country facing tough sanctions usually sees its fiat currency depreciate, but the Russian ruble has done just the opposite.
Russian ruble outshines euro and dollar as transcontinental country’s fiat currency shows resilience
On February 28, 2022, Bitcoin.com News reported that the Russian ruble had fallen to an all-time low and citizens began withdrawing a lot of cash, causing what many reports called a “bank run”. At that time, Russia came under severe financial sanctions from countries opposed to the war in Ukraine. In addition, the United States, the European Commission and Western allies have imposed restrictions on the international reserves of the Bank of Russia.
However, in the second week of April 2022, Bitcoin.com News reported that the country’s central bank had cut rates and pegged the ruble to gold. At that time, the Central Bank of Russia fixed the price of the ruble at 5,000 rubles per gram of gold. Russia has also made it so that “unfriendly” countries are forced to pay for gas in rubles. Numerous foreign buyers comply with the rule and pay for oil products in rubles. The country’s central bank also cut Base bank rate in Russia.
The Russian ruble rebounded to pre-war levels that April week, and the fiat currency has shown resilience ever since. Recently, various titles from Western media showed that the Russian ruble is today the most efficient fiat currency in the world. Speaking to CBS, Jeffrey Frankel, Professor of Capital Accumulation and Growth at Harvard’s Kennedy School noticed that the “non-standard situation” in relation to the growth of the ruble. The ruble hit record highs against the euro zone euro and the US dollar.
In the same report, Tatyana Orlova, lead emerging markets economist at Oxford Economics, said the rise in commodity prices was due to the strength of the ruble. “Now the prices for raw materials are exorbitant, and although the volume of Russian exports is falling due to the embargo and sanctions, the rise in prices for raw materials more than compensates for this fall,” Orlova explained. Orlova went on to tell CBS that there is a huge difference between exports and imports in Russia. The Oxford economist added:
We have such a coincidence that when imports collapsed, exports skyrocket.
Orlova also discussed capital controls imposed by the Russian central bank and how foreign stock and bond holders cannot receive dividends internationally. “It used to be a fairly significant source of outflow of currency from Russia – now this channel is closed,” the Oxford economist concluded.
In the United States, meanwhile, the Biden administration is battling hot inflation, and the issue is hard for the president to discuss. report by New York Times contributors Zolan Canno-Youngs and Jeanne Smialek. Biden declaring that “America is in a stronger economic position today than any other country in the world.” Biden continues to accuse Russian President Vladimir Putin of raising US gas prices and calls it “Increasing prices for Putin.”
What do you think about the behavior of the Russian ruble in 2022? Let us know what you think about it in the comments section below.
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Credit : news.bitcoin.com