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Moscow -The rouble made gains on Wednesday against the dollar and the euro after the Russian government pledged to defend the currency, which had plummeted this week to record lows.
It took 61.7 roubles to buy a dollar on the Moscow stock exchange in late trading, 5.8 roubles less than late on Tuesday. The euro traded at almost 77.5 roubles, 7.6 roubles less than the day before. Earlier in the day, the Russian currency fluctuated between losses and gains.
On Tuesday, the rouble crashed dramatically, with a dollar temporarily costing more than 80 and a euro more than 100 roubles. The collapse came despite a dramatic 6.5-point interest-rate hike to 17% by Russia's central bank.
Wednesday's rise came on the heels of pledges by authorities that they would not allow more instability. The rouble has lost more than half of its value against the dollar since the beginning of the year.
"The government and the Central Bank of Russia have taken up the task of ending the orgy on the foreign currency market," Andrei Belousov, President Vladimir Putin's top economic aide, was quoted by Russian news agencies as saying.
Putin spokesperson Dmitry Peskov said measures would be taken to reduce negative effects for the Russian people. "There is reason for cautious optimism," he said on state television.
Alexei Moiseyev, a deputy finance minister, said earlier that the government would sell foreign currency "as much and as long as necessary" in the face of the rouble's instability.
The Finance Ministry said it has $7bn in cash. Russia's overall foreign currency reserves as of December 5 were $416bn, according to official central bank data.
Rouble 'undervalued'
Prime Minister Dmitry Medvedev said that, while low oil prices and Western sanctions have taken their toll, the central problem is that the rouble was undervalued.
"The figures we saw at exchange offices in the last days do not reflect the real picture," Medvedev said in a meeting with government officials and business leaders.
Medvedev said the government and the Central Bank of Russia had worked out a programme to stabilise the situation.
"There are enough foreign currency reserves, ... and there are market instruments to stimulate demand," he said.
Introducing capital controls "makes no sense," Medvedev said.
The economic turmoil comes amid heightened tensions between Moscow and the West over the conflict in Ukraine. The European Union (EU) and the United States this summer imposed sanctions on large Russian banks, which effectively barred the state and much of the private sector from Western credit markets.
Analysts say that, while the sanctions have contributed to the current woes, low oil prices and a failure to diversify Russia's resource-dependent economy lie at the heart of the problem.
In Washington, US central bank chief Janet Yellen said that US trade and financial links to the Russian economy "are actually relatively small," limiting spillovers in the US.
"Europe, of course, is somewhat more exposed to Russia, both because Russia is an important supplier of oil and natural gas to Europe, and the financial linkages are somewhat greater," she said.
The Russian economy is likely to be discussed by EU leaders when they meet on Thursday in Brussels, diplomats said.
"We see the impact it is having on the [financial] markets in Europe, so it merits a political discussion," one diplomat said on condition of anonymity.
The EU is expected on Thursday to finalise the latest round of sanctions that targets investments in Crimea, as part of the decision not to recognise Russia's annexation of the peninsula from Ukraine.
