As broader financial markets worry about inflation and possible further tightening, the U.S. dollar hit its highest level since November 2002. Specifically, the trade-weighted U.S. dollar index hit a 20-year high, an index that measures the performance of the dollar against a basket of other currencies, including the euro, yen and pound.
Likewise, the Bloomberg Dollar Spot Index, an additional measure of dollar strength that tracks its performance against ten global currencies, hit its highest level since April 2020, when the Covid-19 scare began.
Meanwhile, the Russian ruble remains the best-performing currency this year, after the Russian government imposed capital controls, although few could have gained on this trade.
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Moreover, the actions taken by Russia after the imposition of Western sanctions apparently helped the currency avoid disaster.
Exporters have been forced to sell currency, and Russia requires buyers of its natural gas to pay for it in rubles. What is even stranger is that Turkey and Argentina tried similar measures to control their currencies and did not have the same effect at all.
Currently, the idea that the recovery of the ruble is mainly linked to the increase in commodity prices is the prevailing opinion among experts such as Tatiana Orlova, chief emerging markets economist at Oxford Economics, who shared her opinion. speaking to CBS News. Since oil and gas which were at high levels before the war in Ukraine jumped exponentially after the Russian invasion.
“Commodity prices are currently very high, and even though there is a drop in the volume of Russian exports due to embargoes and sanctions, the increase in commodity prices more than compensates for these declines,” he said. she declared.
Overall, it is difficult to assess the duration of the rally of the ruble and the same can be said of the rise in the value of the US dollar.
Inflation is eating away at consumers’ purchasing power and energy prices are high. Moreover, the brain drain and the lack of trading partners with the West could put additional pressure on Russia, which should limit the rise of the ruble.
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