Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Careful Steps Keep Ruble in Check

As the ruble ends its first week amid the icy gales of market forces, it has fared better than most skeptics would have guessed, with the official rate only falling to 7 rubles to the dollar.

That's a 10 percent drop from a close of 6.31 rubles to the dollar Aug. 14, the eve of the government's dramatic announcement of a ruble devaluation, but it is still well above the 34 percent devaluation which the Central Bank says is the maximum it will permit by the end of the year.

On the streets too, some positive signs are emerging as exchange rates that tumbled to 9 or 10 to the dollar are in some places moving up closer to the official rate.

While analysts and government officials alike say the ruble will continue its decline -- falling 30 percent to 50 percent by year's end -- economists attribute its controlled fall to a series of radical steps by the government that, at the time, were intended to stave off a string of bankruptcies among banks and the government itself, not a ruble crash.

The government froze its repayments on the ruble-denominated treasury-bill market. This helped the ruble because T-bill investors have been collecting their payments as they mature and buying dollars.

The Central Bank's move to impose a 90-day moratorium on repayments of loans and other obligations by Russian banks and corporations has also shielded the foreign exchange market: Banks no longer have to buy dollars to meet forward contracts, repossession deals and syndicated loan payments.

The Central Bank has also raised overnight interest rates to 250 percent to restrict speculation.

Furthermore, banks can no longer borrow dollars from the Central Bank on their own account, but are limited to buying only to fill customers' needs. To do so, they must put up ruble deposits the day before they receive the dollars, which prevents them from speculating on exchange rate changes.

"It's very clever, and it's working," said Konstantin Chernishov, senior analyst at Rinaco Plus.

Now the pressure is off the Central Bank, which announced Friday that it was spending "three times less" defending the ruble this week than it had been -- last week it spent $1.5 billion, of which $500 million was spent on last Friday alone. With hard-currency reserves down Thursday to $15.1 billion, their lowest level since $4.8 billion in emergency bailout money was received from the International Monetary Fund in July, the relief comes just in time.

Dubinin told parliament that his intention was to see "quicker but more predictable" exchange rates. His plan seems to be working for now.