RIO DE JANEIRO, BRAZIL – The Russian ruble has completely recovered from the drop suffered from the sanctions imposed by the United States and its allies.
The ruble was valued at 71 rubles per dollar at closing on Friday and was thus significantly above the rate before the start of economic sanctions against this country.
Less than a month ago –the ruble had recorded a new low of about 121.5 rubles to a dollar.
The Russian currency has also surpassed the value of the Indian rupee. The exchange rate for India is Rs 75.99 per dollar.
The rapid recovery of the ruble is a significant victory for the Russian President Vladimir Putin over Joe Biden, who had earlier dismissed the currency as ‘rubble’.
The Russian Central Bank announced pegging the currency with gold — one gram of gold is currently pegged at 5000 rubles to support the ruble. The move is expected to increase the flow of gold into the Russian Central Bank.
With Russian gold coming under sanctions, the country’s gold stocks — from banks and individuals could be sold to the central bank.
The ruble’s value will further increase once the central bank’s gold stocks from domestic sources increase, which is expected to happen in the next few months.
Besides, Russian President Vladimir Putin also signed an agreement under which foreign buyers must pay ruble for gas purchases. India and even European countries — especially the smaller ones — have already started to pay rubles to purchase Russian gas.
Most of Europe, including Germany, is dependent on Russia for natural gas and oil.
Any currency backed by gold is perceived to be stabler and stronger.
Russia’s gold reserves are estimated at more than 2298.53 tonnes. It is the fifth-largest globally; the US ranks number one, followed by Germany, Italy, and France.
The State Bank of India, in its report, said that anchoring the currency to gold will help stabilize domestic inflation as well.
The dip in Russia’s imports following the Ukraine war is also expected to improve its trade deficit and reflect positively on the ruble,
In recent weeks, the Russian ruble’s near-complete recovery is not a signal that the Russian economy is weathering the sanctions Washington and its allies have imposed since Russia invaded Ukraine, U.S. Treasury Secretary Janet Yellen said on Wednesday.