Moscow: Russia’s rouble strengthened on Wednesday after dramatic falls against the dollar in the previous two days but remained extremely volatile and fears of a prolonged crisis remained.
The rouble was about 3 per cent firmer against the dollar on the day after the government sold dollars to try to prop it up and because exporters sold dollars in preparation for monthly tax payments due this week.
At 1235 GMT, the rouble was up around 3 per cent against the dollar at 65.45 roubles per dollar and was 4 per cent stronger versus the euro at 81.68.
The rouble had fallen by around 6 per cent in the early minutes of trading. Small volumes were capable of moving the market sharply in either direction.
“Today it’s likely exporters are helping the rouble, though we haven’t seen them or the central bank,” said Pyotr Neimyshev at Otkritie bank in Moscow.
The Finance Ministry said it had started selling foreign currency left over on its accounts, but this provided only fleeting support to the rouble.
The rouble has come under heavy selling pressure this week, falling around 20 per cent against the dollar at one stage on Tuesday, despite the central bank increasing its key interest rate by an unexpected 650 basis points, in an emergency move that did little to buttress the currency.
The situation poses a major challenge for President Vladimir Putin whose popularity, based partly on providing stability and prosperity, is at risk from a rouble decline that is damaging Russia’s credibility among investors.
Putin holds his annual end-of-year news conference on Thursday, when he will field questions from a studio audience as well as from television viewers around Russia, and is expected to comment on the rouble’s decline.
His press secretary, Dmitry Peskov, was quoted by Kommersant newspaper as saying the president did not plan to make any “special declaration” and was not expected to comment in detail before the news conference.
Putin failed in a state-of-the-nation address on Dec. 4 to offer any “big ideas” to turn around the economy — which is sliding towards recession after being hit by Western sanctions over the Ukraine crisis and by a fall in the global price of oil, on which the Russian economy is heavily dependent.
Volatile trading
The rouble opened sharply weaker before briefly surging after the Finance Ministry announced the start of its forex sales. The ministry later said it had only around $7 billion (Dh25.7 billion) in leftover foreign currency and that it had not decided yet how much it would sell, curbing market optimism.
“If nothing structurally and geopolitically changes, if everything remains as before, then the $7 billion won’t have any effect,” Neimyshev said.
The rouble’s slide has stirred memories of the 1998 Russian financial crisis, when the currency collapsed within a matter of days.
“What we’re seeing now is the result of choosing the wrong time to float the rouble,” analysts at Bank Zenit in Moscow said in a note, following the central bank’s decision last month to float the currency.
Drawing comparisons with the global financial crisis of 2008/09, they wrote: “In contrast to the situation in 2008-09, the market isn’t sure the central bank will come out to defend the rouble at a firm price.” Investors are awaiting further concerted action from the central bank and government to stabilise the currency market, which has in recent days seen the largest intraday swings since 1998, also prompting increased public demand for dollars.
Two traders said they did not believe the central bank was intervening heavily in the market, and a currency dealer at a large Russian bank said he believed exporters were having their arms twisted to sell their foreign-currency earnings.
Russia’s central bank has conducted over $80 billion in forex market interventions this year to defend the rouble.
The bank on Wednesday said it had conducted $1.961 billion worth of forex market interventions on Dec. 15, the latest date for which it has provided data.
