By Andrey Ostroukh
MOSCOW--Russia's beleaguered ruble rebounded suddenly on
Thursday, intensifying the focus on what the country's central bank
will do when it sets interest rates later in the week and
suggesting that those betting against the currency may have been
caught out.
The ruble gained about 5.5% against the dollar in the space of
few minutes Thursday, with the dollar weakening from a record high
of 43.91 to 41.45. It was the ruble's sharpest one-day rebound in
several years.
"It was an exceptional day for the ruble. I can hardly remember
anything like this in any currency pair," wrote Citigroup in a note
to clients.
The battered currency also recovered sharply against the euro,
trading around 53.10 from its weakest-ever level of 55.49. The
dollar was worth 41.87 in recent trading.
The cause of the sudden move wasn't immediately clear.
"Being a ruble trader is already a particularly tough job on
most days but today, it has to be the most grueling one on any
trading floor. The moves we have been watching today on the screens
have truly been insane, " said Benoit Anne, emerging market
strategist at Société Générale.
The central bank will announce its latest interest-rate decision
at 1030 GMT on Friday. Some economists think it could raise rates
by more than half a percentage point in an effort to support the
crumbling currency, the record weakness of which threatens to
increase inflation by ramping up import costs.
The central bank has been intervening almost daily this month
and has sold more than $28 billion since early October to slow the
ruble's drop.
Even with the recovery, the ruble is still near record lows and
few analysts see any signs of a lasting rebound, given the heavy
toll Western sanctions have had on Russia's economy and the low
price of oil, its main export.
"The incredible volatility that we are now seeing is a
consequence of the fact that the market was too involved in betting
on the ruble's weakness," said Kirill Grishanov, head of financial
markets at Promsvyazbank.
"At one point there were only [negative] positions in the ruble
left on the market," he said--adding that the selling of foreign
currencies by Russia's state-run banks triggered the reversal in
the ruble's trend.
The central bank is committed to allowing the ruble to float
freely next year, although some speculate that the move could come
even earlier. It will retain the right to intervene if it sees
risks to financial stability.
"There was a feeling that sticking to long dollar positions was
increasingly risky as the central bank may enter the market and
chase away the speculative mood," said Sergei Romanchuk, chief
trader at Metallinvestbank.
The central bank declined to comment citing a "week of silence"
it obeys before the Friday rate decision.
Write to Andrey Ostroukh at andrey.ostroukh@wsj.com