Rouble rebounds

Russia's rouble rose on Friday to its strongest levels in more than three weeks, in a sharp rebound from its recent all-time lows, after the government ordered exporters to sell some of their hard currency revenues. The rouble plunged to all-time lows last week on heavy falls in the price of oil, the backbone of the Russian economy, and Western sanctions over the Ukraine crisis.

Finance Minister Anton Siluanov said on Friday the Russian economy could contract four per cent next year and the budget could have a deficit of more than three per cent of gross domestic product if oil prices average $60 a barrel.

Siluanov also told journalists that his ministry had recalculated its budget forecasts to take into account oil prices at $60 a barrel and that he expected the rouble's average exchange rate to be around 51 roubles per dollar in 2015.

He added that state bank VTB could get 100 billion roubles ($1.9 billion) from the National Wealth Fund by the end of the year and 150 billion roubles more in 2015, while Gazprombank could get 70 billion roubles this or next year.

But it has rebounded after authorities took steps to halt its slide and bring down inflation, which after years of stability threatens President Vladimir Putin's reputation for ensuring the country's prosperity.

Those measures included a hike in interest rates, curbs on grain exports and informal capital controls such as orders to large oil and gas exporters Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz) and Rosneft (ROSN.MM: Quote, Profile, Research, Stock Buzz) to sell some of their dollar revenues.

At 0923 GMT, the ruble traded at 52.78 RUBUTSTN=MCX, after earlier reaching its strongest levels since Dec. 1, picking up to about 52.1 in thin trade, with many Western markets closed for the Christmas Day holidays.

Despite the ruble's sharp recovery, signs of economic stress in Russia abound. On Friday, the central bank said it would lend over $2 billion to save Trust Bank from bankruptcy, making it the first casualty of the currency crisis and the 11th significant bank to be rescued this year.

Investors are also nervously waiting to see how oil prices move in 2015, having almost halved from their peak in June, trading just above $60 per barrel amid a global glut and a decision by producing group OPEC not to cut output.

"If oil goes down to $50 (per barrel)... I don't think our authorities will be able to artificially maintain the rate even with higher sales by exporters," said the head of treasury at a major Russian bank, who asked not to be named because he is not authorised to speak to media.

Standard & Poor's credit ratings agency said this week it could downgrade Russia to junk as soon as January due to a rapid deterioration in "monetary flexibility" in the country.

In addition, Russian gold and forex reserves have fallen to their lowest levels since 2009. Last week, reserves dropped by as much as $15.7 billion to below $400 billion, down from over $510 billion at the start of the year.

TOTTERING BANKS
Russians have kept a close eye on the exchange rate since the collapse of the Soviet Union, when hyper-inflation wiped out their savings over several years in the early 1990s.

The central bank has had to spend heavily in recent months to support the rouble via direct interventions and loans to banks via repo operations.

The money to save Trust Bank will not come from reserves but will be disbursed from the rouble liquidity at the central bank.

It will provide a 99 billion rouble ($1.9 billion) 10-year loan to Trust itself and a 28 billion rouble six-year loan to bank Otkritie, which will oversee the rescue mission.

The sums will come on top of some 262 billion roubles the regulator has already spent this year to rescue 10 other banks. It has also withdrawn the licences of more than 80 banks this year, bringing the total number of Russian lenders to under 1,000.

The rouble had tumbled to 80 per dollar in mid-December from an average of 30-35 in the first half of 2014.

The Russian currency was also supported by tax payments to state coffers which usually happen at the end of each month.