The rouble dived more than 11 percent against the US dollar Tuesday in its steepest intraday fall since the Russian financial crisis in 1998 as confidence in the central bank evaporated after a rate hike, Reuters reported.
The Russian currency opened about 10 percent stronger against the US dollar after the central bank unexpectedly raised its benchmark interest rate by a hefty 6.5 percentage points to try to halt the rouble’s slide, but it reversed its gains in volatile trading and repeatedly set record lows.
It has now fallen close to 20 percent this week, taking its losses this year against the US dollar to more than 50 percent and reviving memories of the 1998 crisis, when the currency collapsed within days, forcing Russia to default on its debt.
Although Russia’s public finances and reserves are much healthier than in 1998, analysts say the country is on the brink of a full-blown currency crisis.
At 10:10 a.m. in New York, the rouble had weakened 11 percent to 72.8 against the US dollar, Reuters said.
The currency has been battered by the slump in oil prices and western sanctions imposed on Russia for its involvement in Ukraine, but its slide over the past two days also reflects declining confidence in the central bank.
The rate hike, coming less than a week after another 1 percentage point rise, was seen as a sign of desperation by the bank.
– Contact us at [email protected]