The Russian Ruble Remains Volatile as the Motherland Pledges to Sell Foreign Currency

In London the financial capitol of the world — Trading in the Russian ruble was volatile early Wednesday morning, rallying briefly on news that the Finance Ministry was ready to sell some of its foreign currency reserves, and then weakening again.

The ministry said Wednesday morning that it was prepared to sell as much as $7 billion of those reserves to support the ruble, which a senior official said was “extremely undervalued.”

We will sell “as much as we need to,” Alexei Moiseev, the deputy finance minister, told journalists, the Interfax news agency reported. Separately, Interfax said that the Foreign Ministry had already begun selling the currency.

The ruble was at 68.25 to the dollar in midmorning trading. It closed at 67.50 on Tuesday, when it swung wildly to about 80 rubles to the dollar after opening the day at 64.

“It’s already been a roller coaster,” said Luis Costa, Citigroup’s head of strategy for Central and Eastern Europe, the Middle East and Africa.

Mr. Costa said the market welcomed news that there would be a meeting on Wednesday of the central bank, the Foreign Ministry and important Russian companies.

“We are seeing the level of sophistication and synchronization of efforts here to stem the ruble’s slide is gaining more traction,” he said.

Traditionally, the Russian Central Bank has managed the ruble rate. Since transitioning to a free-float model last month, the bank has sold more than $10 billion in foreign currency to support the ruble in December, including nearly $2 billion on Monday alone.

Some traders and strategists said the Finance Ministry’s announcement would have little effect. They noted that the ministry’s decision to sell foreign currency reserves was no different than the central bank’s efforts, which had done little to help the ruble.

“It’s dollars from the same source,” said one senior trader, who spoke on the condition of anonymity because he was not authorized to speak to the news media. The central bank has sold tens of billions of dollars, he said, “and look what that has done.”

The ruble has lost about half of its value as oil prices have plummeted and as Russia has felt the increasing weight of economic sanctions. On Monday, the central bank drastically raised interest rates to 17 percent from 10.5 percent in an emergency bid to halt the currency’s slide. But rather than reverse the downturn, the move accelerated the panic, as the market interpreted it as an act of desperation.

On Tuesday, traders said the ruble’s weakness reflected concerns about the impact of Russian households’ selling their currency as well as the fear that the government might impose capital controls. Mr. Costa said he did not think that would happen.

“I still believe Russia is far away from capital controls,” he said. “I truly believe the authorities understand if they delve into strong capital controls, credit worthiness will be the main victim.”

Nevertheless, market participants remain on high alert. On Tuesday, MSCI, a New York-based provider of indexes, said it was closely monitoring recent economic developments in Russia. The company said it might exclude its Russia index from its MSCI Emerging Markets Index if Russian authorities were to carry out restrictive measures, such as foreign exchange controls.

Depending on developments, MSCI said it might reclassify its MSCI Russia Index as a stand-alone market or pre-emptively replace local listings with liquid depositary receipts to avoid a potential exclusion.

In a sign of how Russia’s currency volatility is starting to affect Western companies, Apple said on Tuesday that it had stopped online sales of its products in Russia because of the ruble’s tumbling valuation against other currencies like the dollar and the euro.

Some automobile dealerships in Moscow, particularly those selling luxury vehicles, had halted sales by Wednesday, citing the currency’s instability. At dealerships outside Moscow run by Major Auto, a leader in the Russian automotive market, managers at BMW, Jaguar, Land Rover, Toyota, Volvo and others told customers that they had no cars left in stock or that they had been ordered not to make any more sales. Used cars were also not being sold. Several of the dealerships had raised prices this month, and a Jaguar dealer at Major Auto interviewed on Tuesday said that sales had increased by at least 50 percent in the past month.

In Russia, the sell-off has ignited tempers. The central bank has come under criticism from politicians and even from Aleksei Ulyukayev, the finance minister, for not taking drastic and earlier measures to stem the currency’s losses. Mr. Ulyukayev said the central bank should have raised interest rates sooner.

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