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. Last Updated: 07/27/2016

Why the Ruble Stays Stable

For weeks, popular rumor has dismissed the ruble's stability as a Central Bank trick. Many considered that the ruble's sudden recovery, to 398 on Dec. 3 from a record low of 450 a week before, was just the result of massive intervention, politically timed to coincide with the start of the Congress of People's Deputies.


But the official ruble exchange rate continued to hold firm in the first trade for 1993 on Tuesday, registering an insignificant fall to 417 from 414. 5. The ruble has now traded between 419 and 414 for seven sessions.


Banking experts told The Moscow Times on Tuesday that the Central Bank was unlikely to have supported the ruble and said the ruble's recent stability was market driven.


Yury Shegolkov, press officer for the Moscow Interbank Currency Exchange, and an international financial official with a close knowledge of Central Bank operations, both said the Central Bank had not intervened significantly to buy rubles over the past month.


Part of the reason the Central Bank is unlikely to have intervened is that it would have cost too much. The volume traded Tuesday was $54 million, a slight rise on the previous two trades. To hold the ruble steady over the last seven trades could have cost the Central Bank as much as $350 million.


The more likely causes of the stabilization of the ruble stem from a few short-term but market-driven factors.


First, the ruble fell too quicklyjn October and November. Second, the demand for dollars dried up in December because firms needed rubles to pay their year-end tax bills.


Nikolai Gusev, an analyst with the currency exchange, said Tuesday's slight fall in the ruble was probably due to the disappearance of the end-of-year factor.


But as these short-run factors disappear, he expects further falls. "I expect factors in the macroeconomy will exert a downward influence on the exchange rate, although it may not happen suddenly", he said.


The curious fact remains that dollars sell on the black market for more than the official rate. Kiosks on the Novy Arbat will buy dollars for 460-480.


Kiosk traders there explained they were willing to spend more for dollars because as individuals they simply do not have easy access to the twice-weekly auctions at the official exchange.


Trade on the exchange only reflects the demand for dollars from the 70 registered banks, and their big corporate clients.


The only alternative source of dollars for buying imported goods or for simple speculation was the commercial banks. But the banks are charging a wide spread on sales of dollars: Individuals cannot buy dollars from banks for less than 470 rubles.