The Russian ruble has experienced a significant surge in value this year, outperforming other major global currencies and marking its strongest performance since 1994. According to Bloomberg calculations, the ruble has risen by 45% since the beginning of the year, with its value nearing 78 per dollar. This upward trend has been linked to a decline in Russian demand for foreign currency, coupled with a stringent monetary policy that has enhanced the attractiveness of ruble-denominated assets for residents.

The Russian central bank has maintained a record high key interest rate for three years, until it was reduced by 5 percentage points to 16% in December. This move aimed to curb inflation amid sweeping sanctions related to the Ukraine conflict. The interest rate had previously jumped from 9.5% to 20% to stabilize the ruble, following the imposition of Western sanctions. After easing and then tightening again, the rate peaked at 21% in October 2024, before the bank began gradual cuts this year.

Support for the ruble has also come from the Bank of Russia’s foreign currency sales, which reflect the Finance Ministry’s management of yuan and gold from the National Wealth Fund. This management aims to offset lost energy revenue due to Western sanctions targeting Russia’s financial infrastructure. As a result, the ruble’s growth this year ranks it among the top five most profitable global assets in terms of spot returns, following precious metals such as platinum, silver, palladium, and gold.

The official Russian exchange rates for the dollar and euro were historically determined by trading activity on the Moscow Exchange. However, in June 2024, formal exchange-based trading in these currencies was suspended due to Western sanctions. Since then, the Bank of Russia has set the official ruble rates for the dollar and euro using commercial bank data, based on over-the-counter interbank foreign exchange transactions.

The ruble’s surge in value is significant, given the current global economic landscape. The currency’s strength is expected to continue, driven by the Russian government’s monetary policy and management of foreign exchange reserves. As the global economy navigates the impact of sanctions and trade restrictions, the Russian ruble’s performance will be closely watched by investors and economists alike.