So what was the world’s best performing currency of the past month? You guessed it: the Russian ruble. After plunging to 139 rubles to the dollar on March 7, the ruble staged a dramatic comeback to around 80 rubles to the dollar. That’s only slightly weaker than where it was for almost all of last year. The recovery is equally impressive when compared with the euro. At the end of February, it took 89 rubles to buy a euro. In early March, that climbed to around 145 rubles. Now it is down to 87.32.
On Friday, the joke among foreign exchange traders was that the Russian central bank was going to have to cut interest rates to keep the ruble from getting too strong and making its exports too expensive. That’s unlikely, but the point is important: the sanctions on Russia were intended to cripple its currency on the global market in order to weaken Vladimir Putin’s economy. The recovery indicates that the sanctions, even as they have been strengthened both by official measures and private companies renouncing business ties with Russia, are not working as advertised. ............Why does Russia want to be paid in rubles?......To Read More....
My Take - While this may seem rational as a "for the moment" explanation, but it's not the long term explanation. Russian economics is becoming more and more isolated. Their products are not going to be bought if Russia puts on what I will call "counter sanctions". They don't have the productive or economic wherewithal to be successful with these schemes. The more restrictions Russia institutes the more ways nations will find to ignore them and find alternatives leaving Russia in the cold without a warm coat. The long term consequence? Once alternatives have been adopted it's unlikely they'll quickly return to their former economic dealings with Russia because it's clear Russia is unstable.
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