Rouble shows signs of recovery after 15% loss in value

Russia’s embattled currency appeared to be regaining some of its huge losses in early trading, boosted by the finance ministry’s announcement that it is about to intervene.

Deputy finance minister Alexei Moiseyev was quoted by the Interfax news agency as saying it is going to sell foreign currency from its treasury accounts “as much as necessary and as long as necessary”.

The rouble had lost over 15% of its value this week despite a massive interest rate hike by the Russian central bank yesterday, and was at one point more than 20% down.

The world’s worst-performing currency along with the Ukrainian hryvnia, the rouble has lost more than 50% of its value this year, but after posting some fresh losses at the opening today, the rouble reversed its fall an hour into trading and was up 5%.

The moderate rise was further spurred by the finance ministry’s announcement that it believes the rouble to be “undervalued” and is about to begin selling currency on the market.

The rouble has fallen sharply in recent weeks and is down more than 50% since January, due to sinking oil prices as well as the impact of Western sanctions imposed over Russia’s involvement in Ukraine.

German Chancellor Angela Merkel has called Russian President Vladimir Putin to discuss possible steps to secure a comprehensive ceasefire in eastern Ukraine.

Ms Merkel’s office said the two leaders were joined by French President Francois Hollande and Ukrainian President Petro Poroshenko in the discussion.

The rouble fell dramatically yesterday despite the central bank’s decision to raise the rate from 10.5% to 17%.

“This is a very dangerous situation, we are just a few away from a full-blown run on the banks,” Russia’s leading business daily Vedomosti said in an editorial. “If one does not calm down the currency market right now, the banking system will need robust emergency care.”

The move is intended to make it more attractive for currency traders to hold on to their roubles.

Doing so gives them a major return in comparison to many other currencies where interest rate returns are near 0%.

Other options available to the Russian authorities to stem the selling tide could be imposing capital controls or actual intervention in the markets - buying roubles, for example.

Russia’s economic development minister Alexei Ulyukayev yesterday denied that the government was considering imposing capital controls but said that the rate hike came too late.

The collapse of the national currency triggered a spending spree by Russians desperate to buy cars and home appliances before prices shoot higher. Several car dealership were reported to have suspended sales, unsure how far down the rouble will go, while Apple halted all online sales in Russia.