Tags: Russia | Economy | Ruble | Rate Hike

Ruble Slides Again Despite Russian Central Bank Rate Hike

Tuesday, 16 December 2014 07:38 AM

The Russian ruble faced intense selling pressure Tuesday falling at one stage by a whopping 20 percent to historic lows despite a massive pre-dawn interest rate hike from the country's central bank.

The currency, which has been under pressure for weeks because of sliding oil prices and sanctions imposed on Russia in the wake of the crisis in Ukraine, has extended Monday's collapse — when it declined by 10 percent.

It traded at 72 per dollar late Tuesday afternoon. That's a modest improvement on where it was trading earlier — it hit 78.5 to the dollar — but still means that the currency is more 60 percent down from where it was in January. Aware that imported goods were rising in the wake of the ruble's slide, there have been growing indications that Russians have recently been stocking up on big-ticket items, such as fridges and cars.

Tuesday's ruble slide came despite the surprise decision from the Russia's Central Bank to increase its benchmark interest rate to 17 from 10.5 percent.

That represented a desperate attempt by the bank to prop up the country's troubled currency.

Still the country's television stations urged people not to panic.

The central bank's move aims to make it more attractive for currency traders to hold onto their rubles — doing so gives them a major return, certainly in comparison to many other currencies, such as the dollar, where the interest rate returns are near zero percent.

Other options available to the Russian authorities to stem the selling tide could be imposing capital controls or actual intervention in the markets — buying rubles, for example. The central bank has intervened directly in the past few months.

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A massive interest rate hike by Russia's Central Bank on Tuesday failed to stem the selling pressure on the ruble, which slid another 14 percent Tuesday to new historic lows.The surprise Central Bank decision to raise the rate to 17 percent from 10.5 percent came in the...
Russia, Economy, Ruble, Rate Hike
Tuesday, 16 December 2014 07:38 AM
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