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What's interesting is that the Ruble trades 50% higher (in USD) than before Russia's invasion of Ukraine. Why is that? Shouldn't the value of a currency refle

What's interesting is that the Ruble trades 50% higher (in USD) than before Russia's invasion of Ukraine. Why is that? Shouldn't the value of a currency reflect two things, the strength of a nation's economy and the soundness of the currency? The strength of the Russian economy surely went down, right? So it can only be due to the soundness. The market seems to expect Russia will not expand the Ruble supply more than the USA will expand the Dollar supply?

HWR_14 4y ago
The short answer is an attempt at price fixing by the Russian government. You won't be able to get as many USD, say, as the official exchange rate claims. But if a Russian owes you USD, the Russian government considers the debt paid if they send you rubles at the posted rate.
- JonathanBeuys 4y ago
  Shouldn't Russia sending Rubles instead of Dollars to pay USD denominated debt decrease the value of the Ruble? Additional supply -> Lower price.
  - deleted 4y ago
    [deleted]
  - nicbou 4y ago
    It creates additional demand for the rubble, since it has more users. Right?
  - HWR_14 4y ago
    > Shouldn't Russia sending Rubles instead of Dollars to pay USD denominated debt decrease the value of the Ruble? No, because the people buying the Rubles aren't buying them on the open market. The people buying the Rubles are the people owed USD that are buying them for the rate the Russian Central Bank dictates with no choice in the matter. Plus, it provides a price floor. If I owe you $1,000,000 USD, but I can pay you 50,000,000 Rubles instead, I'm incentivized to buy Rubles up until it reaches 50 Rubles : 1 USD. > Additional supply -> Lower price. The supply isn't changing at all. The demand, whether natural or forced, is what's exploding.
JohnJamesRambo 4y ago
> In late February, following the ruble's initial tumble and four days after the invasion of Ukraine began on Feb 24, Russia more than doubled the country's key interest rate to a whopping 20% from a prior 9.5%. Since then, the currency's value has improved to the point that it's lowered the interest rate three times to reach 11% in late May. > Russia is the world's largest exporter of gas and the second-largest exporter of oil. Its primary customer? The European Union, which has been buying billions of dollars worth of Russian energy per week while simultaneously trying to punish it with sanctions. That's put the EU in an awkward spot – it has now sent exponentially more money to Russia in oil, gas and coal purchases than it has sent Ukraine in aid, which has helped fill the Kremlin's war chest. And with Brent crude prices 60% higher than they were this time last year, even though many Western countries have curbed their Russian oil buying, Moscow is still making a record profit. It’s more complicated than those blurbs though. Also while the ruble may be artificially strong it doesn’t mean everything is going great in Russia, far from it. https://www.cnbc.com/amp/2022/06/23/russias-ruble-is-at-strongest-level-in-7-years-despite-sanctions.html https://www.cnbc.com/amp/2022/06/23/russias-ruble-is-at-stro...
- 0xB31B1B 4y ago
  It’s a weird trick. Russia has more money but they can’t import anything so it keeps piling up. Their economy is shrinking +10% yoy because they cannot import the parts necessary to run a modern economy
  - vntok 4y ago
    Surely China and India are willing to sell those parts to Russia.. for the right price.
    - jacobolus 4y ago
      China and India don’t e.g. make the equipment needed to keep Russian fossil fuel extraction working in the medium term.
    - ElectricalUnion 4y ago
fabian2k 4y ago
There are severe restrictions on exchanging or trading rubles, and Russian companies that receive foreign currencies are forced to convert 80% of it to rubles (I assume this is still in effect, I haven't looked for newer information here). So I don't think we know how the ruble would look like if you could freely trade it, right now the price is not determined by a free market.
- dzhiurgis 4y ago
  Exactly. If you are local and have tons some rubles to sell, you wont get even remotely this rate.
jacobolus 4y ago
https://www.cnn.com/2022/06/17/politics/nerd-warriors-treasury-department-sanctions-economic-war-russia/index.html https://www.cnn.com/2022/06/17/politics/nerd-warriors-treasu... > Critical supply chains in Russia have been shattered. Hundreds of Western companies have pulled out of the country. Export sanctions have strangled Russia's access to essential technology and components necessary for entire industrial sectors. Tank factories have shut down. Missile manufacturers are scrambling for critical components and parts. An economy projected to grow in 2022 is now on a path to contract by as much as 15%. > In rare moments of candor, some Russian officials have provided glimpses into the economic damage taking hold. ¶ Russian Minister of Transport Vitaly Savelyev said in May that the sanctions "have practically broken all the logistics in our country." ¶ Russia is by no means the first country that's been sanctioned by the US. But compared with North Korea, Venezuela or Iran, it is far more integrated into the global economy, which has made this latest round of sanctions all the more destructive. ¶ "I think that's what people are missing -- the fact that Russia has to rip apart 30 years of integration into the global economy," said Elina Ribakova, the deputy chief economist at the Institute of International Finance.
Loic 4y ago
The main reason is the very smart central bank management from Elwira Nabiullina. She acted extremely fast and now with little import and export which need to be paid in Rubble this strengthened it. Her problem now is that it starts to be too strong.
deleted 4y ago
[deleted]
gexla 4y ago
Falling imports due to sanctions creating a trade deficit. Russia is getting paid in Rubles for natural resources, but sanctions restricting their ability to spend. Or something like that.
- sam_lowry_ 4y ago
  Dollars, not Rubles.
  - gexla 4y ago
    I don't keep up on the daily turn of events in the Russia-Ukraine conflict, but I believe that one of the demands Russia made in response to the cratering currency was to demand that "unfriendly" countries make purchases from Russia in rubles rather than dollars. My comment simplified the situation though.
    - sgjohnson 4y ago
      And everyone ignored them.
rtpg 4y ago
My understanding is that companies based in Russia now are required to convert their foreign reserves into rubles at a larger rate thanks to a rule change. So from a straightforward perspective you have more companies buying up rubles through... I guess USD -> RUB our EUR -> RUB? So from a basic perspective there's just more of that going on in one direction, less happening in the other direction, so in the end the value goes up. Though it might be pretty theoretical! If you were given a bunch of rubles today, as a Russian national, how easily would you be able to actually convert those to dollars? That being said, tight currency controls at borders for a large economy does let you control the value of your currency like this, and the downsides of relatively heavy currency controls feel really theoretical if you are not trying to hide a bunch of money (from an economic perspective at least).
cudgy 4y ago
Might have something to do with the ruble being pegged to gold reserves. Something Russia did shortly after the latest Ukraine incident. Also, Russian economy is benefiting from much higher energy prices paid in Rubles from selling energy to many friendly countries. Basically, the sanctions aren’t working.
- Isinlor 4y ago
  The goal is to cripple Russian economy, not ruble. Russia is exporting oil and importing most of everything else. We made it very difficult for them to import that everything else especially in industrial quantities. Whatever was produced in Russia, like tanks, will have issues with production lines. Cutting of gas and oil imports will hopefully happen in few years perspective. Russia is already helpfully limiting supply of gas. I would want to see them cut it off fully as they did to Poland, Finland or Bulgaria.
  - jansen555 4y ago
- benj111 4y ago
  Is it in any meaningful sense though? Can the average russian exchange their roubles for gold? Can anyone else legally exchange their roubles for gold?
  - throw-ru-938 4y ago
    Before the invasion you could buy gold coins/bars for RUB from most major banks, but the cut the bank took was of course large. I have no idea how it is now.
- throw-ru-938 4y ago
  The rouble is not pegged to gold reserves. That was just a proposal, coming from one of the least relevant members of the State Duma. (Not that the State Duma actually has any relevant members.) Edit: sorry, that was actually Nikolai Patrushev, who is as relevant as one can be without being Putin himself. Source: https://www.rbc.ru/economics/29/04/2022/626be2919a7947fc6ea26d53 https://www.rbc.ru/economics/29/04/2022/626be2919a7947fc6ea2...

HWR_14 4y ago

The short answer is an attempt at price fixing by the Russian government. You won't be able to get as many USD, say, as the official exchange rate claims. But if a Russian owes you USD, the Russian government considers the debt paid if they send you rubles at the posted rate.

JonathanBeuys 4y ago
Shouldn't Russia sending Rubles instead of Dollars to pay USD denominated debt decrease the value of the Ruble? Additional supply -> Lower price.
- deleted 4y ago
  [deleted]
- nicbou 4y ago
  It creates additional demand for the rubble, since it has more users. Right?
- HWR_14 4y ago
  > Shouldn't Russia sending Rubles instead of Dollars to pay USD denominated debt decrease the value of the Ruble? No, because the people buying the Rubles aren't buying them on the open market. The people buying the Rubles are the people owed USD that are buying them for the rate the Russian Central Bank dictates with no choice in the matter. Plus, it provides a price floor. If I owe you $1,000,000 USD, but I can pay you 50,000,000 Rubles instead, I'm incentivized to buy Rubles up until it reaches 50 Rubles : 1 USD. > Additional supply -> Lower price. The supply isn't changing at all. The demand, whether natural or forced, is what's exploding.

JohnJamesRambo 4y ago

> In late February, following the ruble's initial tumble and four days after the invasion of Ukraine began on Feb 24, Russia more than doubled the country's key interest rate to a whopping 20% from a prior 9.5%. Since then, the currency's value has improved to the point that it's lowered the interest rate three times to reach 11% in late May. > Russia is the world's largest exporter of gas and the second-largest exporter of oil. Its primary customer? The European Union, which has been buying billions of dollars worth of Russian energy per week while simultaneously trying to punish it with sanctions. That's put the EU in an awkward spot – it has now sent exponentially more money to Russia in oil, gas and coal purchases than it has sent Ukraine in aid, which has helped fill the Kremlin's war chest. And with Brent crude prices 60% higher than they were this time last year, even though many Western countries have curbed their Russian oil buying, Moscow is still making a record profit. It’s more complicated than those blurbs though. Also while the ruble may be artificially strong it doesn’t mean everything is going great in Russia, far from it. https://www.cnbc.com/amp/2022/06/23/russias-ruble-is-at-strongest-level-in-7-years-despite-sanctions.html https://www.cnbc.com/amp/2022/06/23/russias-ruble-is-at-stro...

0xB31B1B 4y ago
It’s a weird trick. Russia has more money but they can’t import anything so it keeps piling up. Their economy is shrinking +10% yoy because they cannot import the parts necessary to run a modern economy
- vntok 4y ago
  Surely China and India are willing to sell those parts to Russia.. for the right price.
  - jacobolus 4y ago
    China and India don’t e.g. make the equipment needed to keep Russian fossil fuel extraction working in the medium term.
  - ElectricalUnion 4y ago

fabian2k 4y ago

There are severe restrictions on exchanging or trading rubles, and Russian companies that receive foreign currencies are forced to convert 80% of it to rubles (I assume this is still in effect, I haven't looked for newer information here). So I don't think we know how the ruble would look like if you could freely trade it, right now the price is not determined by a free market.

dzhiurgis 4y ago
Exactly. If you are local and have tons some rubles to sell, you wont get even remotely this rate.

jacobolus 4y ago

https://www.cnn.com/2022/06/17/politics/nerd-warriors-treasury-department-sanctions-economic-war-russia/index.html https://www.cnn.com/2022/06/17/politics/nerd-warriors-treasu... > Critical supply chains in Russia have been shattered. Hundreds of Western companies have pulled out of the country. Export sanctions have strangled Russia's access to essential technology and components necessary for entire industrial sectors. Tank factories have shut down. Missile manufacturers are scrambling for critical components and parts. An economy projected to grow in 2022 is now on a path to contract by as much as 15%. > In rare moments of candor, some Russian officials have provided glimpses into the economic damage taking hold. ¶ Russian Minister of Transport Vitaly Savelyev said in May that the sanctions "have practically broken all the logistics in our country." ¶ Russia is by no means the first country that's been sanctioned by the US. But compared with North Korea, Venezuela or Iran, it is far more integrated into the global economy, which has made this latest round of sanctions all the more destructive. ¶ "I think that's what people are missing -- the fact that Russia has to rip apart 30 years of integration into the global economy," said Elina Ribakova, the deputy chief economist at the Institute of International Finance.

Loic 4y ago

The main reason is the very smart central bank management from Elwira Nabiullina. She acted extremely fast and now with little import and export which need to be paid in Rubble this strengthened it. Her problem now is that it starts to be too strong.

deleted 4y ago

[deleted]

gexla 4y ago

Falling imports due to sanctions creating a trade deficit. Russia is getting paid in Rubles for natural resources, but sanctions restricting their ability to spend. Or something like that.

sam_lowry_ 4y ago
Dollars, not Rubles.
- gexla 4y ago
  I don't keep up on the daily turn of events in the Russia-Ukraine conflict, but I believe that one of the demands Russia made in response to the cratering currency was to demand that "unfriendly" countries make purchases from Russia in rubles rather than dollars. My comment simplified the situation though.
  - sgjohnson 4y ago
    And everyone ignored them.

rtpg 4y ago

My understanding is that companies based in Russia now are required to convert their foreign reserves into rubles at a larger rate thanks to a rule change. So from a straightforward perspective you have more companies buying up rubles through... I guess USD -> RUB our EUR -> RUB? So from a basic perspective there's just more of that going on in one direction, less happening in the other direction, so in the end the value goes up. Though it might be pretty theoretical! If you were given a bunch of rubles today, as a Russian national, how easily would you be able to actually convert those to dollars? That being said, tight currency controls at borders for a large economy does let you control the value of your currency like this, and the downsides of relatively heavy currency controls feel really theoretical if you are not trying to hide a bunch of money (from an economic perspective at least).

cudgy 4y ago

Might have something to do with the ruble being pegged to gold reserves. Something Russia did shortly after the latest Ukraine incident. Also, Russian economy is benefiting from much higher energy prices paid in Rubles from selling energy to many friendly countries. Basically, the sanctions aren’t working.

Isinlor 4y ago
The goal is to cripple Russian economy, not ruble. Russia is exporting oil and importing most of everything else. We made it very difficult for them to import that everything else especially in industrial quantities. Whatever was produced in Russia, like tanks, will have issues with production lines. Cutting of gas and oil imports will hopefully happen in few years perspective. Russia is already helpfully limiting supply of gas. I would want to see them cut it off fully as they did to Poland, Finland or Bulgaria.
- jansen555 4y ago
benj111 4y ago
Is it in any meaningful sense though? Can the average russian exchange their roubles for gold? Can anyone else legally exchange their roubles for gold?
- throw-ru-938 4y ago
  Before the invasion you could buy gold coins/bars for RUB from most major banks, but the cut the bank took was of course large. I have no idea how it is now.
throw-ru-938 4y ago
The rouble is not pegged to gold reserves. That was just a proposal, coming from one of the least relevant members of the State Duma. (Not that the State Duma actually has any relevant members.) Edit: sorry, that was actually Nikolai Patrushev, who is as relevant as one can be without being Putin himself. Source: https://www.rbc.ru/economics/29/04/2022/626be2919a7947fc6ea26d53 https://www.rbc.ru/economics/29/04/2022/626be2919a7947fc6ea2...