In light of the collapse of the Ruble I think it’s worth revisiting what controls exchange rates.
Supply and Demand.
Yeah, if you know something about the subject you’re probably shaking your head.
Supply and Demand doesn’t set prices in many cases in the way that an Economics 101 course tells you.
Such texts will say that the exchange rate is based on exports and imports.
For many countries, that isn’t true; or not all the time. The US dollar can move up even when the trade balance is south (as it has been for decades now.) The same is true of many other economies.
Britain hardly exports anything any more. But people want to live in London. Or they want the city to invest their money, or they want to buy art at Sothebys, or they just want a relatively safe place they can run to if the politics in their country go south.
People likewise want Manhattan real-estate; a US passport, and so on. A vacation or home in Paris or the South of France.
They want to buy stocks in important companies which are defining the future, like Apple, or Tesla, or Google, even if those companies manufacture overseas.
They want money in China to take advantage of China’s high growth rate and returns, while Chinese want money out for diversification and to have a safe place to go if the politics turn against them.
People don’t want vacation homes in Russia, by and large. They may want to take advantage of growth opportunities (which exist in certain sectors), but before the sanctions they were scared of corruption (with good reason) and post sanctions they are worried about getting returns out. Since most of Russia’s exports are of hydrocarbons, and since people don’t want to move money into Rubles otherwise, the value of the Ruble in terms of other currencies moves up and down with the price of hydrocarbons.
There are other factors, for example if you offer high returns, that can matter (raising returns didn’t matter to Russia, because the potential value was swamped by fears of further ruble and oil devaluation.) Speculation of future gain or loss in the futures and options markets can raise or lower the value of your currency as well. You can fix your currency and you can make it stick if your economy is strong enough in specific ways (mostly having to do with producing what you need). China did this for years, and so have many other countries. This can lead to black market currency markets and problems, but that can be better than the alternatives (as Russia may now be finding out.)
But if you float your currency, the bottom line is that excahnge rates (with a few exceptions) to rise and fall based on how much people want from your country which they have to buy with your currency.