By Andrey Ostroukh
MOSCOW--The ruble strengthened in early trade Wednesday after
the Russian Finance Ministry said the beleaguered currency is
"extremely undervalued" and announced plans to start selling its
excess foreign-exchange holdings.
But trading remained volatile, with the currency falling as much
as 5% against the dollar shortly after the market opened and then
reversing to trade more than 5% stronger. In late morning, the
ruble was trading around 66.40 a dollar, down from 67.50 at the end
of Tuesday. Oil prices were slightly weaker.
The Finance Ministry said it "considers the ruble to be
extremely undervalued and has started selling foreign currency from
its balances on the market."
The ministry later said its holdings total about $7 billion, but
it didn't specify how much it would sell. "We'll be selling for as
long as we need to," the Interfax news agency quoted Deputy Finance
Minister Alexei Moisseyev as saying.
"Calming the population and pre-emptively addressing any banking
sector issues is of the utmost importance, especially ahead of the
weekend," Alfa Bank said in a note. "However, given yesterday's
price action [the ruble swung 32% intraday without much central
bank support], it seems that the monetary authorities at least for
now are willing to let the market find its own equilibrium."
The central bank, which has vastly greater currency reserves of
$416 billion, showed no sign of intervening in the market
Wednesday, traders said. Its limited sales of dollars and euros in
recent days--it spent $1.96 billion on Monday--haven't been enough
to slow the ruble's drop.
"The big market theme is still of position liquidation," said
Société Générale strategist Kit Juckes. "Money is leaving Russia
rather than short ruble positions being put on."
After an emergency meeting Tuesday with Prime Minister Dmitry
Medvedev, Russian officials said additional measures were planned
to stabilize the financial markets. A 6.5-point interest rate rise
to 17% on Monday night did little to calm the markets Tuesday, and
the ruble plunged to record lows of 80 a dollar, before recovering
some of the lost ground late in the day.
President Vladimir Putin has maintained public silence on the
ruble's woes this week. His spokesman told a local newspaper
Tuesday that he planned no "special statements' on the situation
but would likely address it at his annual news conference,
scheduled for Thursday.
Valentina Matvienko, speaker of the upper house of parliament,
played down the crisis saying, "this has to be viewed like bad
weather which will pass. We can't oversimplify the situation but we
shouldn't sow panic because that will only make things worse," the
Interfax news agency quoted her as saying at the opening of the
session Wednesday.
Many Russians reacted with shock this week to the huge drops in
the exchange rate, gyrations reminiscent of financial crises in
2008 and 1998 that battered the economy and confidence. Banks
reported surging demand for foreign currency, with lines at
branches and ATMs and some running out of dollars and euros.
Interfax reported that a number of major banks in the industrial
city of Chelyabinsk had run out of foreign-currency cash.
Retailers also were scrambling to keep up. Major Auto, a large
chain of car dealers, said it suspended sales of autos Tuesday amid
the ruble moves, though many models, especially luxury brands, had
already sold out. Consumers had been racing to spend their
depreciating rubles on durable goods such as vehicles, appliances
and electronics in recent weeks before stores raised the ruble
prices.
Write to Andrey Ostroukh at andrey.ostroukh@wsj.com
Access Investor Kit for Société Générale SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=FR0000130809
Access Investor Kit for Société Générale SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US83364L1098