The Russia Ruble has strengthened a staggering 38% versus the dollar since the beginning of the year. Standing at 82.3 to the US dollar on Wednesday, the currency is the best-performing in the world year-to-date. The ruble has outpaced even the safe haven of gold, analysis by Bloomberg shows.

Domestic factors have caused the currency to strengthen, including record-high local interest rates. This compares to the dollar which has faced mounting pressure from President Trump’s tariff war. “Unlike many emerging-market currencies, the ruble is not facing pressure from capital outflow, caused by global investors’ retreat from riskier assets,” economist Sofya Donets told Bloomberg. She added that capital controls have largely shielded Russia, as higher borrowing costs strengthen the currency.

Russia’s Central Bank has imposed strong economic measures which includes raising the key interest rate to 21%. This is in response to the soaring inflation due to President Putin’s increased military expenditure.

The higher interest rates, in turn, have attracted more foreign investment who are seeking higher returns, which increased demand for the ruble.

On the other hand, Donald Trump’s Liberation Day tariffs caused a stir among investors in the US and reduced confidence in the dollar. This greatly contributed to the rise of the rubel in relative terms.

While a strengthening currency may sound positive, which it is for those seeking to invest in Russia, it poses a risk to Russia’s energy revenue, reducing the competitiveness of President Putin’s exports.

Russia’s government had based its 2025 budget on an exchange rate of 96.5% per dollar, which is 14% weaker than the current level.

Russian economist Alex Isakov said the Rubel had benefited from three separate developments since the beginning of the year. The first being the “Putin-Trump thaw” which saw confidence in Russia’s market boost.

“Second, tight monetary policy is cooling corporate and consumer demand for imports, increasing the net supply of hard currency,” he added.

Thirdly, Mr Isakov believes Russia’s government is shielding the economy from the effects of a drop in oil prices “by selling hard currency from its National Wealth Fund”.