Markets fighting central banks can be compared to a heavyweight boxer fighting a lightweight. The lightweight can place a few quick punches and wiggle around his slower opponent for a little while but will eventually get knocked out.
The Russian central bank is about to get knocked out by the force of the markets which are a lot bigger, despite still sizeable foreign exchange reserves ($385 billion at the current ruble rate).
On Nov. 10, it abandoned setting an upper and lower price band for the ruble (down 41 percent against the dollar this year), but didn’t completely give up yet.
“The ruble exchange rate will be determined by the market factors that should enhance the efficiency of the Bank of Russia monetary policy and ensure price stability.”
This, however, is wishful thinking which is why the CBR reserved the right to continue to prop up the ruble in case of a crisis—and crisis is where we are heading. Since Oct. 1 the CBR spent close to $14 billion dollars buying up rubles—to no avail.
