The Russian ruble seemed to be on the rebound Wednesday, following two days of precipitous decline that prompted economists to predict a total collapse of the national economy while spurring a spending spree by consumers who frantically purchased a range of big-ticket items in a bid to pre-empt inevitable price increases.
According to news reports, the ruble on Wednesday rose to 63 against the dollar, fell back down to 72, and then rose again to 65 early in the afternoon. It hit a low of 80 to the dollar on Tuesday, down from 34 at the start of the year.
The Guardian reports: "Much of the rally on Wednesday appeared to be the result of government intervention, making it unclear whether the ruble would stabilize properly or had just reached a temporary plateau."
Further clarity is expected to come on Thursday, when President Vladimir Putin delivers his annual press conference and fields questions from a studio audience and television viewers around Russia. He is expected to comment on the ruble's decline of about 45 percent this year.
The ruble has come under heavy selling pressure this week, falling around 20 percent against the dollar at one stage on Tuesday, sparking fears of financial meltdown, despite the central bank hiking its key interest rate by 650 basis points.
The situation poses a major challenge for President Vladimir Putin whose popularity, based partly on providing stability and prosperity, is at risk from a ruble decline that is damaging Russia's credibility among investors.
"This is a moment of truth" for Putin, Masha Lipman, an independent political analyst in Moscow, told Bloomberg. "It’s no longer possible to go on in the same fashion. The economy is tumbling. The time has come for a definitive choice, doing nothing won’t solve the problem."
The Russian economy has been hit hard by a combination of falling oil prices and Western sanctions. Those sanctions, introduced with the aim of forcing Putin to change course in Ukraine, have had little effect, writes Angus Roxburgh at the Guardian—at least, not on their intended subject.
"But since the measures show no sign of having any effect on his thinking, and yet the west is considering even more sanctions, there is obviously another goal—to punish Putin for his actions, regardless of whether he changes his mind. Sadly, it is not Putin who feels this punishment. It is the Russian people."
Indeed, panic does seem to have gripped the Russian populace. As the AP reports:
Shops selling a broad range of items were reporting record sales — some have even suspended operations, unsure of how far down the ruble will sink. Apple, for one, has halted all online sales in Russia.
"This is a very dangerous situation, we are just a few days away from a full-blown run on the banks," Russia's leading business daily Vedomosti wrote in an editorial Wednesday. "If one does not calm down the currency market right now, the banking system will need robust emergency care."
Alyona Korsuntseva, a consumer in her 30s, says the current jitters surrounding the Russian economy reminded her of the 1998 Russian crisis when the ruble tumbled following the government's default on sovereign bonds.
"What's pressuring us is the fact that many people (back then) rushed to withdraw money from bank cards, accounts," she says. "We want to safeguard ourselves so that things wouldn't be as bad they were back then."
Consumers are buying durable goods because Russian stocks are too volatile as an investment and an overwhelming majority of Russians cannot afford to buy land or real estate.
Follow the developing ruble crisis and find analysis on Twitter: