The ruble slipped again as President Vladimir Putin told reporters during his annual press conference on Thursday that the currency’s falls were ‘not a crisis’.
“I would not call the situation a crisis, you may call it whatever you want,” Putin told reporters.
Currency markets, however, appear yet to be convinced with anouther round of volatile trading in the ruble, which briefly breached 63 rubles to the dollar again before falling back.
The ruble was highly volatile on Thursday gaining over 2% in early trading before swinging to a 3% fall on the day. At the time of writing it is 1% up against the dollar as Putin attempted to reassure people over the prospects for the Russian economy, which is widely expected to fall into a recession next year due predominantly to collapsing oil prices and western economic sanctions over the country’s role in the ongoing Ukraine crisis.
Russia’s currency has fallen over 45% against the dollar and the euro since June, hitting an all-time record low of 80 rubles to the dollar and 100 roubles to the euro earlier this week. The falls have tracked the collapse of crude oil prices, which have also tumbled from their June highs.
The chart below shows the performance of the ruble against the dollar (orange line) versus Brent crude prices (green line):
Putin praised the actions of both the government and the central bank in their attempts to mitigate the impact of the currency falls on the nation’s economy. However, the Russian central bank forecasts that if oil prices remain around $US60 a barrel next year the economy will contract by around 4% — a severe recession.
Despite the sharp recent falls Putin again ruled out imposing capital controls (whereby limits would be imposed on cash withdrawals and businesses could be forced to sell foreign currency reserves). He said there are currently “no plans” to force exporters to sell their currency earnings.
However, the central bank did announce emergency measures to defend Russia’s beleaguered banking sector from further ruble weakness on Wednesday. These include allowing Russian companies not to mark their assets to market (a measure that will prevent them from having to raise additional funds to cover potential losses), allow companies to use exchange rates from the previous quarter when assessing how much capital they need to cover their liabilities and increase the number of currency auctions (whereby the central bank provides dollars and euros in exchange for collateral) it carries out.
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