Russia Moves To Defuse Its Currency Crisis

Russia Defends Ruble With Biggest Rate Rise Since 1998 -- Bloomberg

Russia took its biggest step yet to shore up the ruble and defuse the currency crisis threatening its stricken economy.

In a surprise announcement just before 1 a.m. in Moscow, the Russian central bank said it would raise its key interest rate to 17 percent from 10.5 percent, effective today. The move was the largest single increase since 1998, when Russian rates soared past 100 percent and the government defaulted on debt.

The news prompted an immediate gain in the ruble, with one-month ruble forwards up 1.6 percent in Asian trading.

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Update: Ruble jumps on Russia rate hike, oil pressured (Reuters)

My Comment: With oil prices declining and sanctions beginning to bite .... the Russian government had to take this bitter medicine. Everyone knows that this is going to hurt the economy, but the option of doing nothing to protect the Ruble was not an option .... and small steps would have signaled to everyone that Russia was not serious in addressing it's currency/fiscal crisis. Hence ... this massive rate hike. Will it be enough .... I hope so. But I suspect that it will not, and as long as the Ukraine crisis continues and sanctions are in placed coupled with declining oil prices .... the Ruble is going to be under pressure.

On a personal note .... yes .... I do have a Russian bank account .... and yes .... this has hurt my bottom line .... but fear not .... I will survive. But damn .... I did not expect the Ruble to crash this much .... and if I may brag a little bit ..... I am good at predicting these things .... in fact .... people pay me good money to predict these things.

Sighhhh .... I certainly missed this one.

Update: Zero Hedge is right on this one .... What America Does Not Understand About Russia & Oil.