Ruble’s Unexpected Waltz: How a Beleaguered Currency Danced Circles Around the Swiss Franc
In a year when most investors would have bet against the Russian ruble, it pirouetted past the Swiss franc with a 10% leap in just three months. What conjured this improbable rally—and is the music about to stop?
From Fortress to Spotlight: Russia’s Interest Rate Gambit
Start with the basics: Russia’s central bank has played its only ace—interest rates—again and again. By July 2025, the key rate stood at 18%, after a spell at a punishing 21%. Compare that to Switzerland’s feather-light 0.25% policy rate. The spread was irresistible: euro-funded traders borrowed at 2-3%, then feasted on nearly 19% returns in ruble deposits or bonds. This carry trade became a global sideshow, funneling capital towards Moscow even as sanctions thickened the plot.
Import Collapse: The Silent Partner in Ruble Strength
But yield alone doesn’t write the score. Russia’s import machine stalled: physical imports plummeted, car-recycling fees soared, and battered domestic demand saw non-food goods fall to 40% of consumer baskets. The result? Fewer rubles chasing foreign currency, a subtle but powerful tailwind for the ruble’s exchange rate. Even as oil and gas exports withered—down 33% year-on-year by May 2025—Russian households found imported food 20-25% cheaper and electronics prices steady or falling.
The Cease-Fire Mirage and Sanctions Chessboard
One cannot ignore geopolitics. A whiff of optimism around a potential cease-fire—however fragile—sparked hopes of partial sanctions relief. Meanwhile, Moscow’s payment-system reforms forced more foreign exchange to stay within its borders, tightening the supply of rubles for cross-border transactions. Yet, this is a shallow market: with $300 billion in reserves frozen and the National Wealth Fund’s liquid assets below $40 billion, any tremor could spark wild currency swings. For now, though, the prospect of peace and regulatory tweaks combined to add buoyancy, not drag.
Switzerland’s Soft Step: SNB’s Rate Cut and the Safe-Haven Paradox
While Russia danced with risk, Switzerland glided in a different direction. The Swiss National Bank’s March 2025 rate cut to 0.25%—its lowest since 2022—was a nod to persistent disinflation (0.3% CPI). The franc’s 9% appreciation in April 2025 reflected a global search for safe havens, but it also risked making Swiss exports less competitive. As capital sought yield elsewhere, the franc lost some of its shine—especially against a ruble supercharged by carry trades and capital controls.
Carry Trade: The High-Wire Act
The mechanics are simple, the risks profound. Investors borrowed in low-yielding francs and euros, then piled into ruble assets for double-digit returns. The result? The RUBCHF pair rose 10% in three months, and an eye-watering 37.5% over twelve months. But the higher the wire, the sharper the fall: as Russia’s central bank signals further rate cuts, the incentive for carry traders could evaporate overnight, unleashing a reversal as sudden as the rally.
A Waltz with Shadows: Fragile Fiscal Foundations
Underneath the bravado, cracks widen. Russia’s budget deficit hit 1.5% of GDP in spring 2025. Oil receipts, the state’s lifeblood, are $18 per barrel below budget assumptions. The National Wealth Fund—once a fortress—now looks skeletal, with liquid assets teetering just above $36 billion. If oil hovers near $52 per barrel and the ruble stays strong, the fund could be depleted within a year. This is a currency waltz on a floor of ice—thrilling, but treacherous.
Encore or Curtain Call?
For now, the ruble’s three-month leap against the Swiss franc is a triumph of policy, circumstance, and tactical capital flows. But the music could change in an instant: a cease-fire, deeper sanctions, or a sudden reversal in rate differentials would scramble the choreography. This is no slow waltz to safety—it is a bold, high-stakes dance where the next misstep could be costly. For those watching the RUBCHF pair, remember: every dazzling rally has its shadows. The encore is never guaranteed.