How does Russia do it?
Ruble continues to rise despite new sanctions
4/7/2022 1:14 p.m
One sanctions package after another rains down on Russia, but the exchange rate of the ruble continues to rise. It is now even back to pre-war levels. The reasons are probably high interest rates – and also Germany’s energy imports.
On the foreign exchange market, the ruble rose despite a planned new package of EU sanctions. The Russian currency has thus continued the course recovery of the past few weeks. In the morning, 79 rubles were paid for one US dollar. The exchange rate is roughly at the level it last had at 78 rubles immediately before the outbreak of the Ukraine war. Analysts refer to the high key interest rate of the Russian central bank, strict capital controls and surpluses in the trade balance due to the still possible energy exports, which Germany also continues to purchase.
After the start of the Ukraine war on February 24, the exchange rate of the ruble collapsed, at times up to 177 rubles were paid for one dollar. In the past few weeks, however, the price has recovered quickly. With the sanctions imposed by western industrialized countries on the Russian central bank, the ruble is no longer considered a freely tradable currency. On the foreign exchange market, however, the currency is traded with restrictions, which allows for a ruble exchange rate.
High interest rates in Russia
Commerzbank’s foreign exchange expert Tatha Ghose sees one reason for the ruble’s recovery in the high interest rates in Russia. The country’s central bank doubled the key interest rate to 20 percent at the end of February. In addition, the Commerzbank expert referred to strict capital controls. The central bank has limited foreign exchange exports. Also, sanctioned oligarchs and corporations cannot transfer money from Russia to foreign bank accounts.
Analysts also refer to the Russian trade balance. “The trade balance should improve after the sanctions,” Ghose said. Because while the export of Russian energy such as oil or gas is still possible, the import of Western goods has been severely restricted by the sanctions.