Are there examples in history that teach what happens to the currency of a war winner? Is any of this knowledge transferrable to the current situation, with either Ukraine or Russia winning the war?


2 Answers 2


Strength/value of a currency depends on:

  • trade balance: exports create pressure for currency to become stronger and imports create pressure for currency to get weaker.
  • capital flows: capital inflows create pressure for currency to become stronger and outflows pressure for currency to become weaker.
  • monetary policy: loose monetary policy leads to weak currency. Tight monetary policy leads to strong currency.

War does not have direct impact on how strong currency is. There are only indirect effect because of course war affects trade and capital movement.

Winning war has ambiguous effects on capital and trade movement. USSR technically won the WWII and Germany lost WWII. Despite being a looser Germany managed to become exporting powerhouse and USSR pursued autarky and experienced capital outflows. This lead Deutsche Mark being much more valuable than Ruble.

Naturally, there are historic examples where winner of war had stronger currency than looser. What I am trying to get across is that war itself does not affect strength of the currency, it is the effect of war on trade and capital inflows that does so. Moreover, regardless of war or who is a victor policy of central bank is quite important factor.

So winning war does not help or hurt currency in itself. It all comes to what country does during the war and after in terms of their trade policy, monetary policy and making itself attractive to capital inflows.


In general, I agree with the given answer. I would like to add that after-war, Allied-occupied Germany had rampant barter and black market trade and a weak, unaccepted currency plus Allied military currency. The Deutsche Mark was created 3 years after the war. Insofar, the actual currency during the war ceased to exist and the Bundesbank only exists since 1957.

If Ukraine lost the war, it would likely become Russian territory and the UAH will almost surely be replaced by Rubel (which happened in Crimea already).

Ultimately, it all depends.

  • On the time horizon you look at (couple months after war vs several years, with the latter obviously being less and less influenced by the impact of war).
  • Who will run the country after the war. I doubt Ukraine would invade Russia but the current regime will potentially cease to exist in Russia if it lost the war. If the new regime pleases investors, it may well be that Russias currency would do better compared to Russia winning the war and staying isolated and sanctioned.
  • How the currencies can be traded (offshore). There could be an official rate and a shadow rate like in Iran for example. ...

The only truly reliable indicator is excessive inflation (which must be a result of loose monetary policy). Otherwise, an FX rate is essentially unpredictable as explained here.


The effect of RUB replacing UAH depends on the exact same considerations as above and has largely nothing to do with the replacement itself.

On October 3rd, 1990, former East and West Germany re-unified. The GDR Mark (East Germany) was worth 5 to 10 for one Deutsche Mark on Black markets. Yet, the East German mark was converted at par (for most parts, even including wages) which was a massive subsidy to East Germany. However, the USDDEM exchange rate was very stable during this period and fluctuated very little in historical context during 1987 and 1999.

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On the other hand, during this time (since 1979), the European Monetary System (EMS) set up the so called European Exchange Rate Mechanism (ERM) which required the currencies of participating countries to fluctuate within fixed margins. It turned out that the DEM and German central bank became the dominant player who was able to set its monetary policy largely autonomously. This helped Germany in achieving its goal of low inflation and growth (thereby keeping the USDDEM FX rate relatively stable) but created problems elsewhere. Most noteably, it forced the British government to pull the pound from the ERM and made a few people very wealthy and well known.

  • $\begingroup$ In the scenario of UAH being replaced by ruble, what impact would that replacement have on the strength of ruble in relation to USD? $\endgroup$ Nov 30, 2022 at 7:28

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