Moscow helps ruble bounce back

Russia's ruble bounced back somewhat in early morning trading on Wednesday, boosted by the finance ministry's announcement to intervene in financial markets by selling its US dollar reserves to support the ailing currency.

"The finance ministry considers the ruble extremely undervalued and is starting to sell its leftover currency on the market," spokesperson Svetlana Nikitina said. And Deputy Finance Minister Alexei Moiseyev was quoted by Russian news agency Interfax as saying that the ministry was going to sell foreign currency "as much as necessary and as long as necessary."

The ministry added that it had around $7 billion (5.6 billion euros) in leftover stocks.

After posting some fresh losses at the opening, the ruble reversed its fall an hour into the trading and was up 5 percent at 64 rubles to the US dollar at 11.45 am Moscow time (0815 GMT).

Nevertheless, the ruble has lost over 15 percent of its value this week. The currency slumped to about 80 rubles to the US dollar on Tuesday, in spite of a massive interest rate hike from 10.5 percent to 17 percent by the Russian central bank.

Ruble hit by sanctions, falling oil prices

The Russian currency has suffered a turbulent year, losing more than 50 percent of its value since January amid plunging oil prices and Western sanctions imposed on Russia for its role in the Ukrainian crisis.

"This is a very dangerous situation, we are just a few away from a full-blown run on the banks," Russia's leading business daily Vedomosti said in an editorial on Wednesday. "If one does not calm down the currency market right now, the banking system will need robust emergency care."

The ruble is likely to come under more pressure this week, as US President Barack Obama intends to sign a bill allowing tighter economic sanctions against Moscow.

But some analysts think this will have little effect on the ruble's uncertain future.

Gernot Erler, the German government's coordinator for relations with Russia, said oil prices - not Western sanctions - were to blame for Russia's economic troubles.

"It's an illusion to think that if the sanctions were to fall away tomorrow, the Russian economy would suddenly be all right again," Erler told rbb-Inforadio on Wednesday.

el/uhe (AP, AFP, Reuters)