Magazine article Global Finance

Europe: Russia's Oil Revenue Supports the Ruble

Magazine article Global Finance

Europe: Russia's Oil Revenue Supports the Ruble

Article excerpt

The ruble crisis seems like a distant memory. In August 1998, the Russian central bank threw in the towel. With the ruble under severe downward pressure, the central bank suspended trading of rubles for US dollars to conserve the country's dwindling foreign exchange reserves.

Now, Russia's central bankers have a different problem on their hands. They are finding it necessary to intervene in the markets to keep the ruble from appreciating too quickly.

With the average price of Urals crude rising to a 12-year high of $30 a barrel earlier this year, the country's trade surplus soared.

While the oil price is unlikely to regain the pre-Iraqi war levels, there is no immediate threat to the Russian current account surplus, which is still likely to exceed $15 billion this year, says Clyde Wardle, emerging-markets currency strategist at HSBC Hank USA in New York.

The Russian central bank indicated in mid-February that it could tolerate a 6% appreciation in the ruble during 2003. …

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