"Harsh winter; devaluation of the currency; protests. No, not the UK," said FT.com's Alphaville, but Russia. The authorities are on the defensive over the slide in the rouble. It has fallen by 35% against the dollar in the past six months. Slumping oil prices are set to tip the current account and the government budget into deficit this year and, along with a credit freeze, send growth into negative territory for the first time since the 1998 ruble crisis. $148bn of capital fled the country in the second half of last year.
The government was worried that a sharp drop in the currency would shatter confidence and threaten political stability as it did in the 1998 crisis, which wiped out the population's savings. So it has burned through a third of its currency reserves, slowing the currency's adjustment, and recently tried to put a floor under the ruble by allowing it to move in a wider band against its euro/dollar basket. But the currency has been scraping the lower edge of the band, even though the government has raised interest rates to attract capital.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
£150 off energy bills: millions more to get discount this winterThe expansion of the Warm Home Discount scheme follows a government U-turn on the Winter Fuel Payment. We explain who will get the £150 discount
-
Akio Toyoda takes back control of ToyotaToyota chairman Akio Toyoda once made a pledge to fulfil his grandfather’s dreams for the family business that became Japan’s first domestic carmaker. He is now making good on that promise.
