Here’s the rouble versus the euro, courtesy of Reuters:
The Russian currency has appreciated by about 10 per cent over the past three months. Received wisdom puts this down to the rising price of crude, but the relationship would seem to be one of trend rather than close correlation:
The rouble is a “managed float” currency, rather than a free float, so the Bank of Russia sets a trading band according to a 45/55 euro/dollar currency basket, and then allows the band to shift up (or down) after prescribed bout of intervention.
How strong a rouble can Russia take? Oil might be up, but that doesn’t mean the Russian economy is anything other than fragile. And a rouble seemingly headed in one direction must hurt.
Analysts at Barclays have mentioned the possible use of “soft measures” — perhaps increasing capital reserve requirements for banks FX deposits so as to deter speculative accumulation of roubles. But something blunter must be a possibility.
Maybe interest rates at 8.5 per cent are just too high.