MOSCOW: Russia called for calm yesterday after the ruble hit a four-year low point against the euro amid fears of an imminent end to the US Federal Reserve’s stimulus programme.
The Russian currency fell to 44.33 rubles against the euro early yesterday — a level not seen since 2009 — before gaining back some strength and settling at 44.28.
It also exchanged hands near a month-old low against the dollar at 33.19 rubles.
The ruble has lost value along with other emerging market currencies on the belief that the US economic recovery will soon let the Federal Reserve to scale back its monthly $85bn bond purchasing programme.
A Federal Reserve statement issued on Wednesday showed some board members believing that the easing programme should be rolled back quickly while others stressing “the importance of being patient”.
The tapering of the stimulus funds would theoretically raise the yields of US bonds and draw in investors who had previously searched for value in riskier economies. The Russian central bank’s overseer of financial markets quickly dismissed speculation that the ruble would continue a steady decline reminiscent of what occurred in the 2008-2009 global financial crisis.
“The ruble is fairly strong and stable,” the Prime news agency quoted Sergei Shevtsov as saying.
“Rumours about the weakening of the ruble are being exaggerated by a fair amount.” The Russian central bank has spent hundreds of millions of dollars daily purchasing rubles in the summer months to prop up the currency and avoid a politically-damaging slide. The Vedomosti daily said that support amounted to $4.2bn and ¤374m in July alone — the highest rate of intervention since October 2011.
But the ruble still lost 8.7 percent of its value between January and July against the mixed-basket of dollars and euros used by the central bank to gauge the value of its currency.
Shevtsov argued that the currency was only “fluctuating because we are moving toward a free-float.”
The London-based Capital Economics consultancy noted that the ruble has faired better than the currencies of emerging markets in Asia thanks to the high price on Russia’s oil and natural gas exports.
Those revenues have swelled Russia’s gold and hard currency reserves to $507.8bn as of August 16 — a healthy balance that should enable the central bank to prop up the currency for years if needed.
“Nonetheless, the ruble is still weaker than the usual relationship with oil prices would otherwise imply,” Capital Economics noted. “We expect the currency to weaken further over the coming months and quarters.”
Adding to the uncertainty is speculation that some factions in the Russian government see a weaker ruble as a way out of the country’s current economic malaise. AFP
