Russian Ruble Passes Brazil’s Real as 2022’s Top Currency

Many Latin American currencies have been on a roll this year. The surge is best exemplified by the Brazilian Real, which has appreciated ~14% year-to-date. With the global supply chains struggling, commodity prices have risen, and a commodity-heavy country like Brazil (e.g., industrial metals and agricultural products) has seen its currency benefit. The Real has outperformed the Great Britain Pound, the Euro, and all other currencies, except the Russian Ruble.

After Russia invaded Ukraine, a conflict that tragically continues to this day and has left more than 4,600 dead, the Ruble went underwater. By March 8th, the currency had gone down 46%. NATO imposed heavy economic sanctions on Russia, like Germany’s suspension of a natural gas pipeline project, cutting Russia off the SWIFT financial system, and blocking access to the US dollar. All these sanctions caused the currency to become almost worthless, but Vladimir Putin had an ace up his sleeve.

Putin knows that he still holds a grip on the world with the largest reserves of natural gas, which account for about 40% of Europe’s supply, and cutting that relationship has been a harder sanction to impose. In March, he demanded that all countries that have been “unfriendly” towards Russia must pay for natural gas using only the Ruble, essentially forcing them to partake in Russia’s economy again. As in a crazy roller coaster ride, the Ruble has gone soaring past the Real to a ~21% growth year-to-date. Despite this victory, Putin is by no means out of trouble now. Most currency exchanges have stopped accepting the Ruble, and his country is facing double the US’s inflation rate, with a projected 15% shrink of its GDP.