Russia's Currency Falls Despite Interest Rate Rise

Russia's Central Bank has appeared to be happy to let the rouble fall gently but consistently until now, taking dramatic action to try to stem the decline,

Jeremy Beckwith 16 December, 2014 | 2:34PM
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Overnight the Russian Central Bank increased interest rates from 10.5% to 17%.  This follows sharp declines in the rouble on the foreign exchange markets over the course of this year beginning of course with Russia’s annexation of Crimea in February.  During the year the Central Bank has appeared to be happy to let the rouble fall gently but consistently but intervened to spend  its foreign exchange reserves whenever the speed of the decline accelerated.

Last night they decided to take some dramatic action to try to stem the decline, hence the sharp rise in interest rates.

It does not seem to have worked as the dollar exchange rate has fallen from 67 to 80 this morning – another 20% decline.

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Jeremy Beckwith  is Director of Manager Research for Morningstar UK

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