Friday, September 5, 2008

Russia Props Up Ruble

Speculators should be thnking about buying the ruble while there is blood in the streets of Georgia.

Russia’s central bank intervened heavily yesterday to support the ruble, FT is reporting. Reports indicate that as much as  $21 billion of foreign capital might have been pulled out of the country in August in the wake of the conflict with Georgia. The central bank said that the capital outflow from Russia last month were only $5 billion.

The ruble fell as low as R30.41, yesterday, its weakest level since the Russian central bank adopted its euro/dollar basket in February 2007. The central bank governor admitted there had been capital outflows since the war but said the amount was much lower.

The currency intervention was the first since the height of the war with Georgia at the beginning of August. Before the conflict the central bank’s interventions in the market were aimed at stemming the rise of the rouble, which it manages to a basket weighted 55 per cent in dollars and 45 per cent in euros.

As a result of strong oil prices and other natural resources ,Russia’s central bank still has a huge war chest to defend its currency. Its reserves measured in this week at $582  billion, the third-largest foreign currency reserves in the world.

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