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 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.
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Small volumes were capable of moving the market sharply in either direction.
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.
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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.
Mr. 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.
Mr. Putin failed in a state-of-the-nation address on December 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 in leftover foreign currency and that it had not decided yet how much it would sell, curbing market optimism.
The rouble’s slide has stirred memories of the 1998 Russian financial crisis, when the currency collapsed within a matter of days.