Russia's currency, the ruble, has recovered by about 10 percent, after falling sharply in value this week, as the government pressured exporters not to hoard their foreign currency. Consumers in Moscow have been on a spending spree, on fears of price hikes, after a massive interest rate increase failed to stop the ruble's decline.
The ruble regained some ground Wednesday in volatile trading, but investors remain nervous about currency's stability.
Russia's central bank spent billions of dollars this week propping up the ruble after a jump to a 17 percent interest rate failed to arrest its decline.
The Russian currency this year lost more than half its value and on Tuesday alone dropped at one point by 20 percent before recovering about half the loss.
The ruble's gains Wednesday came as Prime Minister Dmitry Medvedev met with the heads of export companies, including energy giants Rosneft and
He urged the exporters to “rhythmically” sell their foreign currency earnings, rather than save them, to help stabilize the ruble.
Russian exporters, which are paid in foreign currency, are one of the few sectors of the economy that benefit from a cheaper ruble - because it lowers their prices of their products abroad.
“I think it really depends on company by company. Those exporters that have revenue in foreign currency and, of course, in rubles, they are not actually suffering that significantly," said Andrei Braginsky, managing director of communications for the Moscow Exchange. "For other sectors, the mass devaluation of the currency, of course, is negative.”
Importers are among those most suffering from the currency's decline as foreign goods cost more.
The U.S. computer company Apple halted online sales in Russia to prevent losses from the exchange rate.
Russian shoppers are lining up at some stores in Moscow to buy big-ticket items in anticipation of price increases.
But Braginsky says the buying spree offers limited benefits for companies.
“Now, consumers are buying hectically. Because Russia largely [relies] on imported goods," he said. "There are a lot of stocks which were brought into the country at different currency levels. So, people are buying iPhones, they're buying imported cars, and the clothes, and everything they could buy still at old prices. So, it's a -- short-term at least, it's a consumer boom in Moscow.”
Financial analysts say the ruble's drop this week was also fueled by concerns Rosneft might convert a recent ruble-denominated bond issue into foreign currency to pay debt. The oil company denied any plan to buy up dollars and criticized the central bank for the ruble's drop.
The ruble’s decline makes it more expensive for Russian companies to pay foreign debts, raising concerns that some could be forced to default.
Rising inflation and an expected recession could move Russia from an economic crisis to a political one.
President Vladimir Putin rose to popularity when high oil prices filled government coffers and fostered growth.
Falling oil prices and Western sanctions for Russia's actions in Ukraine fueled the sharp drop in the ruble.
But economists say a more fundamental problem is Russia's failure to use oil revenues to diversify the economy and attract foreign investment.
Market watchers will be paying close attention Thursday to Putin's annual news conference for any comments that might affect markets.
His speech earlier this month to Russian lawmakers failed to raise confidence in the economy as he used the occasion to criticize Western nations.