While Russia's economy has faced significant turmoil due to heavy war-related sanctions, the country's currency has not suffered. The Russian ruble has grown significantly and is up 45% against the U.S. dollar in 2025. And interest rates on ruble deposits have similarly seen widespread growth, helping to attract investment savers. But according to financial analysts, the spike in the ruble's value may end up doing more harm than good to Russia's economy.
The ruble has become the "best-performing global currency, posting this year's strongest gains against the dollar," said Bloomberg. It has even outperformed generally safe commodities like gold and silver, as well as typically strong European currencies like the Swedish krona and Swiss franc.
The spike in the ruble, as shown by data from the Bank of Russia, has been "driven primarily by the central bank's tight monetary policy and optimism" that the war in Ukraine could end, said Reuters. The Russian bank's handling of China's currency, the yuan, has also played a role, as Russia has been "selling the Chinese yuan, its only major intervention tool, to support the ruble." As a result, when the ruble "strengthens against the yuan, its rate against the dollar strengthens as well to avoid arbitrage." This has made China's currency more valuable in Russia than the U.S. dollar, and in "2024, 95% of Russia's trade with China was settled in yuan and rubles."
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The "strength of the ruble has less to do with a sudden jump in foreign investors' confidence than with capital controls and policy tightening," said CNBC. Russia's central bank has "maintained a restrictive stance to curtail high inflation," and there has also been a "decline in foreign currency demand from local importers" due to the shrinking U.S. dollar, Andrei Melaschenko, an economist at Renaissance Capital, said to CNBC. The decline in the dollar has "given the ruble a boost as banks don't need to sell rubles to buy the dollar or yuan."
What next?
While the ruble has been extremely strong, this could cause cascading problems for Russia's economy. The ruble's "strength might cheer traders," but the "Russian government likely prefers the opposite," said Business Insider. The outlet noted that when a country's currency appreciates in value, it can "tend to diminish export revenue, threatening to weigh on the nation's budget."
The "sharp appreciation is proving to be a double-edged sword for the heavily sanctioned Russian economy," said Reuters. Energy revenues are also affected by the increase, and Russian businesses "argue it is making exports more expensive to buyers in dollars and other currencies." The increasing ruble value has not helped the overall Russian economy. Russia's central bank "cut the benchmark interest rate by two percentage points, to 18%," in the "latest sign of the country's economic slowdown," said The New York Times.
Many economists think the ruble is a moot point. The country is seeing a "prelude to stagflation, when an economy and employment stop growing but prices continue to rise," said the Times.
This is "unlikely to affect the Kremlin's ability to wage war in Ukraine for the foreseeable future," said the Times. However, this doesn't mean other effects won't be seen, as economic downturn "may lead Moscow to reduce spending in other areas, such as social benefits and infrastructure."
