Russian Rouble Surges 45% Against Dollar Amid Tight Monetary Policy, Peace Optimism

The Russian rouble has surged about 45% against the US dollar since early 2025, making it one of the best-performing currencies globally this year. This rise is mainly driven by Russia's tight monetary policy, with interest rates above 20%, and optimism stemming from US-Russia peace talks in February. However, the strong rouble presents challenges, including reduced dollar-denominated energy revenues for the Russian budget and higher costs for exporters selling to foreign buyers, which could hurt trade. Central bank governor Elvira Nabiullina argues that a weaker rouble would indicate economic vulnerability, emphasizing that the strong currency results from necessary measures to combat persistent inflation. The central bank has also intervened by selling Chinese yuan to maintain rouble stability and prevent arbitrage. Looking ahead, the rouble's strength may be tested by potential new US sanctions and possible interest rate cuts, which could weaken the currency later this year.