The rise of the rouble amid the Ukraine invasion

How did the Russian currency bounce back so quickly after sanctions ? Will it continue with its upward trend ?

The story so far: The Russian rouble has staged an impressive recovery after it lost about half of its value in the wake of Russia’s invasion of Ukraine. The currency has recovered almost all of the losses it incurred following the invasion and has thus, surprised many who had predicted a further fall in its value.

Sanctions were imposed on the Russian economy by Western governments right after Russia invaded Ukraine in late February. These sanctions included cutting off many Russian banks from the SWIFT payments signalling system and also freezing the Russian central bank’s foreign reserves held abroad.

Many western companies including oil majors such as British Petroleum and Shell also pulled out of Russia amid pressure from Western governments.

Sanctions basically made it harder for Russian businesses to sell their goods abroad and also made it harder for ordinary Russians to purchase goods from abroad.

The freezing of the Bank of Russia’s forex reserves held abroad also made it harder for the Russian central bank to use its foreign reserves to prop up the value of the Russian currency.

Naturally, the rouble experienced a sharp hit right after these sanctions, thus leading many to believe that the Russian economy had been brought to its knees.

Surprisingly, however, the Russian currency has staged a remarkable recovery in the last three weeks. It took about 81 roubles to purchase a US dollar one day before Russian forces invaded Ukraine on February 24. A couple of weeks later, it took 151 roubles to purchase a US dollar, marking the rouble’s low since the beginning of the war.