Wednesday saw the sharp strengthening of the RUB in volatile trade following the statement of Finance Ministry who said that its left-over stocks are being sold as foreign currency.
Under heavy selling pressure this week, the ruble forced the CB force to escalate its key interest rate to an unanticipated 650 basis points during an emergency move that was weak to defend the currency.
As of this hour, the ruble increase to around 3% versus the dollar at 65.52 but it was 4.2% stronger against the euro at 81.50.
After its slight recovery last Wednesday, RUB was still low almost 50% compared against the dollar this year after it stirred the 1998 crisis that witnessed the collapse of the currency within a matter of days.
President Vladimir Putin, whose popularity could be partly accounted for providing stability and prosperity, now has to wrestle another major challenge. His risk is determined by the declining ruble that destroyed the trustworthiness of Russia among investors.
Market participants believed that exporters could be selling dollars observing the approaching tax period. A dealer of currency at a big Russian bank warned that that CB intervention could not be excluded.
The dealer believed that ruble’s strengthening appears artificial, although he does give a 100% guarantee that it is the fault of the CB. There could have been an error of an exporter, whom they have convinced to sell forex.
This year, CB Russia conducted more than $80 billion in forex market to shield the ruble that was pushed lower by faltering oil prices, sanctioning of Western over Ukraine and a market panic that was on the rise.
Last Wednesday, the bank conducted an intervention in Forex market worth of $1.961 billion.