None of this is playing out the way the experts said it would.
And they sure didn't understand Mdme. .
From CNBC, June 6:
- The Russian ruble has staged a stunning rally in 2025, emerging as the world’s top-performing currency so far this year.
- According to the Bank of America, it has been the best-performing currency since the start of the year.
In the midst of a long-drawn war, declining oil prices, stiff sanctions, and an economy that’s on the downhill, Russia’s ruble has been rising.
In fact, it is the world’s best-performing currency so far this year, according to Bank of America, with gains of over 40%. The ruble’s stunning rally in 2025 marks a sharp reversal from the past two years when the currency had depreciated dramatically.
What’s powering the Russian currency?
The strength in the ruble has less to do with a sudden jump in foreign investors’ confidence than with capital controls and policy tightening, market watchers told CNBC. The weakness in the dollar comes as an added bonus.
Brendan McKenna, international economist and foreign exchange strategist at Wells Fargo, lists three reasons for the ruble’s rally. “The central bank has opted to keep rates relatively elevated, capital controls and other FX restrictions have tightened a bit, and [there’s been] some progress or attempt at progress in finding a peace between Russia and Ukraine.”Russia’s central bank has maintained a restrictive stance to curtail high inflation, keeping domestic interest rates high at 20% and tightening credit. The steep borrowing costs are deterring local businesses from importing goods, in turn reducing demand for foreign currency among Russian businesses and consumers, said industry watchers....
....MUCH MORE
We have a few dozen posts on Russia's Central Banker. I wish we could trade Powell for her.
Maybe even add Paul Krugman and a couple other economists as a sweetener.
Some previous thoughts on Elvira:
Here's one from January 2024's "How China talked markets out of a run on the yuan":
If a country is spending $1 trillion to defend its currency, they are doing it wrong. As was pointed out in June 2022's "An Analysis of The Wartime Actions Of Governor Elvira Nabiullina and The Russian Central Bank":
....The key to any currency operation by a central bank is the art of patience. You can't go burning through your FX reserves attempting to support your fiat. See any number of examples with Soros v. Bank of England being the first that comes to mind. You have to wait for that inflection point where the speculative raid is running out of momentum and then go huge, sweeping any offers and coming back and saying "What else ya got?"
This is apparently what Nabiullina did, minus the American colloquialism, of course.
Sometimes It's Easy To Foretell The Future
This piece was posted 2 1/2 months before Russia invaded Ukraine.
Tuesday, December 7, 2021
Former Swedish Prime Minister Bildt: "It’s time to let Russia know once and for all that Ukraine is off limits"
That was the headline on his December 6 Washington Post OpEd.
The question, of course, is how are you going to enforce it?
Reuters reported earlier today: "West could cut Russia from SWIFT, sanction Nord Stream, Latvia says"
Do they think Russia hasn't thought of this possibility? Of course they did, a decade ago.
We're dealing with a nation of chess players. They've gamed out four possibilities, sixteen countermoves and 64 counter-countermoves. Meanwhile the American military have been working on their pronouns.
And the Russians also have a secret weapon: Elvira Nabiullina, the head of the Russian central bank.
Imagine having to do a high wire act, allowing the rouble to fall, keeping rates up to counteract the inflationary tendency that introduces, trying to account for the huge asset flows in the underground/oligarch economy while all the while Putin is yelling at you from the sidelines.
She is very good at what she does.She has already considered and put on the back-burner a proposal to use the Orthodox Church as an internal payment system, It's there, just in case, you know, the electronic stuff goes down.
Here's the introduction to 2018's "Russia’s central bank quietly raised its key interest rate by 0.25 percentage points on Friday":
If you think having Donald Trump question the Fed head for raising rates is playing rough, just imagine working for Vlad Putin as his popularity drops.
Considering the hand she's been dealt, the chief of the Russian central bank, Ms. Nabiullina, should have garnered a couple more Euromoney Central Banker of the Year awards to sit next to the one she received in 2015.
Seriously, since she took over in 2013 oil prices collapsed, then doubled, the annexation of Crimea led to the first set of sanctions, the rouble fell 50%, the U.S. Treasury threatened Russian banks with exclusion from SWIFT, the second set of sanctions on companies and oligarchs led to the retraction of multi-billion dollar credit facilities which had to be replaced internally and a couple other things that I'm having trouble remembering....She has payment systems in place with China and together with the oil & gas honchos is ready to redirect those flows.
And finally, if things escalate, what is to stop the Chinese from attacking Taiwan at the same time Russia moves its border west. With a two-front war, NATO and the U.S. would be shown to be paper tigers.
Here's an ungated version of the WaPo OpEd at the University of Pennsylvania.
And a final thought. When the SWIFT threat was being bandied about, Russia had no alternatives so she needed both an emergency solution and a longer term solution,
The emergency plan was to use the Church, as mentioned above
An attempt to use SWIFT sanctions would result in the creation of a parallel system.
The longer term plan became the Mir payment system which inspired China's CIPS.
And a couple weeks earlier: Russia's Central Banker And Ukraine's War Dead
The highlight of the currency vs. oil price is very intriguing and understanding that goes a long way toward understanding Russia's economy and government and the war in Ukraine.
The underlying facts are that Russia is balancing three legs of a trilemma stool, adjusting one leg, then another in an attempt to find an equilibrium.
The Governor of Russia's central bank, Elvira Nabiullina knows the oil price-currency interplay.
And all the while Vladimir is looking over your shoulder....
That was one of many posts that we gathered in 2020's "Russia's Central Bank Gamed This Scenario Out Years Ago, Did Yours?".
