FX.co ★ Russian Ruble Hovers at 2-Year High

In July, the Russian ruble reached 78 per USD, marking its strongest point in two years. This strength was largely due to stringent capital controls enacted by the Kremlin and an assertive monetary policy. The Russian government prolonged measures compelling companies to convert their foreign currency earnings into rubles, thereby artificially boosting demand for the national currency. Under the new directive, companies are required to sell 40% of their foreign exchange proceeds until April 2026, despite Kremlin reports indicating that firms are actually selling 70% of their earnings. Concurrently, a decelerating Russian economy and Western sanctions continued to hinder domestic businesses from importing goods and services, which in turn suppressed local demand for hard currencies. On the monetary policy front, the Central Bank of Russia (CBR) reduced its benchmark interest rate by 100 basis points to 20% at its latest meeting. However, borrowing costs remain near record highs, a situation persisting since the last quarter of 2024. Ultimately, markets seemed to dismiss US President Trump's threats to impose tariffs on nations purchasing Russian oil unless President Putin agrees to a ceasefire in Ukraine by mid-September.