The Russian central bank appears to have avoided a currency crisis this week, at least temporarily. Policymakers
virtually painted a target on the ruble by announcing in late January that they
had established a new floor on the currency in order to stabilize its slide. In
fact, the opposite happened. Within days investors pushed the currency's value
down against the floor, threatening to cause another large selloff of foreign
exchange reserves in its defense.
After losing over a third of the country's reserves
since August and having the government's debt rating lowered by Fitch last week,
the central bank made a change of course by tightening interest rates, making
speculation more costly and easing the pressure to draw down official reserves.
The move even caused the ruble yesterday to make its biggest gains against the dollar and euro in the past two years, signaling a
While they are not out of the woods yet, the Russians
seem to have finally taken a step in the right direction. And at time when
everyone is focused on the mounting woes in the world economy, any good news on the economic front is