1 Ruble – Russian Federation

In 2021, the Russian ruble demonstrated a notable recovery and stability, rebounding from the significant volatility and depreciation experienced during the initial shock of the COVID-19 pandemic in 2020. This strength was primarily driven by a sharp recovery in global oil and gas prices, which are critical to Russia's export revenues and fiscal stability. Furthermore, the Central Bank of the Russian Federation (CBR) maintained a consistently hawkish monetary policy, raising its key interest rate from 4.25% at the start of the year to 7.5% by December to combat rising inflation, which bolstered the currency's attractiveness for carry trades and capital inflows.

Underpinning this stability were robust macroeconomic indicators, including a current account surplus exceeding $120 billion for the year, record-high international reserves approaching $630 billion, and a relatively low level of government debt. The government's fiscal rule, which mandates the conversion of excess oil revenues into foreign currency assets for the National Wealth Fund, also acted as a built-in stabilizer, insulating the domestic economy from commodity price swings and preventing excessive ruble appreciation that could hurt other export sectors.

However, the year ended with emerging pressures that signaled future challenges. Inflation accelerated to over 8% by year-end, significantly above the CBR's 4% target, driven by strong consumer demand, global supply chain issues, and rising food prices. Geopolitical tensions also began to weigh on investor sentiment, with markets growing increasingly nervous about the potential for Western sanctions in response to Russia's military buildup near Ukraine. Consequently, while the ruble's 2021 performance was strong, these domestic and external inflationary and geopolitical risks created a backdrop of uncertainty moving into 2022.