USD/RUB climbs to all-time highs as rouble collapses

on Dec 16, 2014
Listen, Tuesday, December 16: The USD/RUB has hit fresh record highs during today’s volatile trading session. Confidence in the Russian currency continued to evaporate after an unexpected overnight rate hike backfired, inducing further panic in the country’s financial sector.

The pair had soared nearly 11 percent to 72.197 as of 13:57 GMT, and was trading 35 percent over its 50-day simple moving average of 46.858. Despite the surprise decision by the Central Bank of Russia to raise its short-term interest rate in the middle of the night by 650 basis points from 10.5 percent to 17 percent the currency continued to depreciate today after initially showing signs of steadying. The USD/RUB has skyrocketed over 28 percent since the end of last week and has more than doubled since the beginning of the year.

The Wall Street Journal quoted Natalia Akindinova, a professor at the Higher School of Economics, as commenting: “We are seeing an economic crisis […] We are seeing a sharp devaluation of the ruble at a time when the central bank doesn’t have the reserves to influence the market, as it did in the past crises.”
President Vladimir Putin has blamed both the slide in the rouble and in oil on financial speculators and the West. Reuters quoted Vladimir Miklashevsky, an economist at Danske Bank, as saying: “The central bank will have a very hard time stabilizing the rouble as long as the sharp sell-off in oil prices continues”.
The Russian economy has taken a hit as the price of oil, which provides about half of the country’s budget revenue along with natural gas, has continued its rout and fell below $60 dollars a barrel earlier today. It is estimated that every $10 drop in the price of oil costs Russia $28 billion in receipts.

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