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by dpa (TNS)

MOSCOW — The ruble continued its plunge against the dollar and euro on Tuesday, despite Russia’s Central Bank raising interest rates by a massive 6.5 points to 17 percent to stem the steep decline.

The ruble stood near 65 to the dollar at 11:45 am (0845 GMT). It had dramatically slumped by more than 10 percent to above 64 per dollar on Monday.

Against the euro the Russian currency also continued to fall, sliding to more than 81 from 77.8 on Tuesday evening.

The Moscow stock exchange went on a roller coaster ride, with the RTS index falling by 5 per cent after trading opened and later rising to 4 percent plus, only to fall again to 1.5 per cent underneath Monday’s closure.

The Russian Central Bank announced the massive interest hike at 1 am local time on its website, saying that the decision aimed to “limit devaluation and inflation risks,” which it said had risen significantly recently.

The Bank had only raised its key interest rate by one point to 10.5 percent last Thursday, but that did not stop the ruble from tumbling further.

The ruble has lost almost half of its value since the start of 2014, first because of international tensions over Ukraine but later mainly because of falling oil prices.

The Russian economy strongly depends on oil and gas, which make up some 60 per cent of its exports.

In another negative sign, oil prices sharply dropped Tuesday to below 60 dollars for a barrel of North Sea Brent, which had stood at 62.60 Monday.

The bank’s dramatic step evoked memories of 1998, when Russia defaulted on its debt and devalued the ruble.

Analysts wondered whether the bank’s decision was enough to stop the ruble’s free fall. Alexei Kudrin, Russia’s former finance minister and a leading liberal, said that the interest rate hike was not enough.

“This move needs to be followed by government decisions to raise investor confidence in the Russian economy,” he wrote on Twitter.

The Kremlin refused to comment on the interest rate hike. President Vladimir Putin’s spokesman Dmitry Peskov said in radio interviews that the Russian Central Bank is independent.

AFP Photo/Steve Holland

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Photo by marcn/ CC BY 2.0

Reprinted with permission from Alternet

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