Putin confident of stable ruble, bank sets intervention limit

[BEIJING] Russian President Vladimir Putin on Monday expressed confidence that the ruble, which has lost nearly a quarter of its value so far this year, would soon stabilise as Russia's central bank said it would intervene only if "financial stability" was threatened.

The Russian strongman blamed speculation for the currency's volatility, insisting that it was "absolutely" no reflection of the country's economic situation.

"We can see speculative moves in the exchange rate, but I think that will end very soon, given the actions taken by the central bank in response to the speculators," said Mr Putin in Beijing, where he is attending the Asia-Pacific Economic Cooperation (APEC) summit.

The Bank of Russia said on Friday it was ready to step in to protect the crashing ruble, after the currency lost 10 percent in value last week alone amid plunging oil prices and the fallout from the Ukraine crisis.

Then on Monday the central bank in Moscow announced that it was removing the range it had fixed for the ruble up to now, allowing it to float freely on the market.

But that "did not amount to a total renunciation of any interventions in the currency market, which would be possible in case a threat to financial stability appears," it said.

The Bank of Russia, which has been planning to shift to inflation-targeting like central banks in the West, had progressively enlarged the range for the ruble to float over past years, thereby limiting its possible interventions.

But the ruble has fallen as Western sanctions on Russia over its role in the Ukraine crisis have led to a surge in capital flight from the country.

The Bank of Russia said in a statement Friday that it spent US$30 billion in October to keep the ruble afloat, vowing to spend more if needed "as well as use other financial instruments at its disposal." "The financial authorities have taken all the necessary measures," said Mr Putin on Monday, adding that they do not intend to impose capital controls.

The Russian currency near midday Monday climbed to 56.99 rubles to the euro and 45.70 rubles to the dollar - far from the record lows it touched last week of 60 rubles against the euro and 48 against the dollar.

Analysts however cautioned that the increasing tensions in eastern Ukraine could again impact the ruble, or that the market might test the central bank's resolve.

"We remain worried that the market might want to test the will of the regulator to act and might wait for strong interventions to halt the negative spiral," said analysts at VTB Capital.

AFP