Russia: Central Bank abandons defense of ruble

The ruble’s value plunged once again against other currencies after the Central Bank of Russia returned to a “free-float” on the ruble yesterday. The move was designed to reduce speculative pressure on the currency as it continued to face heavy selling despite a major rate increase last week. The bank did not fully remove itself from the ruble’s defense, stating that it has limited its daily interventions to $350 million, but this is far below recent levels that stood around $2 billion, which has been rapidly depleting Russian foreign reserves.

The ruble’s slide has been increasing recently, as the Central Bank’s policy of intervention immediately following precipitous declines has made the currency an easy target for speculators to make almost-certain bets. The bank is adjusting its strategy, allowing the ruble to drop farther on expectations of the bank reversing its decision. With oil prices nearing $80 a barrel and sanctions looking to stay in place, a pickup on the Russian economy is looking farther away than ever.

Follow us on Twitter: @SteppeDispatch

News Briefs:

  • China Railway Corporation has announced that a new high speed railway connecting Urumqi, the capital of Xinjiang province with Xinjiang’s Hami Prefecture, will become operation on November 12. The construction of the bullet train will expedite relocation efforts encouraged by Chinese government, who have urged large amounts of ethnic Chinese to migrate to Western China in order to avoid overpopulation in Central Chinese cities.
  • Tajik President Emomali Rahmon has made headlines by declaring that freedom of speech exists within Tajikistan. In a ceremony commemorating the 20th anniversary of the Tajik constitution, Tajikistan’s first and only president added that freedom of speech clearly exists due to the existence of “hundreds” of private media outlets within the country. Tajik censors recently blocked social media websites in an effort to slow anti-government protests, while Human Rights Watch and Freedom House have harshly criticized the nation for censoring anti-government news sources.
  • The Islamic Development Bank has doled out approximately $100m USD in loans to assist Uzbekistan in fulfilling the basic needs of its rural population. Tashkent recently renewed its cooperation agreement with the Arab Coordination group and expects to use the funds to spearhead the construction of housing structures in rural communities. The loan will account for less than 10% of the total $2.2b USD that the Uzbek government intends to spend before the project’s completion.
  • Russia has quietly amassed the sixth largest gold reserves in the world. The move to hoard gold has been a key component of Russian strategy to diversify its foreign exchange reserves, which still consists primarily of dollars and euros. The Russian Central Bank has recently been forced to dip into its foreign reserves to attempt to bail out a weak Russian economy, and may also be obligated to sell its gold reserves should the economy continue to weaken.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s