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Russia's ruble, stocks continue to fall

Russia's ruble, stocks continue to fall

Russia's currency and stock markets fell further Wednesday after the central bank said it would back off defending the ruble and hiked interest rates, and as dropping oil prices threatened the state's finances and the economy.
The ruble traded at 27.5 rubles against the U.S. dollar, 0.15 rubles weaker than Tuesday, on the MICEX exchange. That extended the previous day's losses, when the Central Bank let the currency lose half a ruble against the dollar.
Russia's Central Bank on Tuesday scaled back its defense of the embattled currency, which it normally keeps stable in value against the dollar and euro by buying or selling it with its own reserves. On Tuesday it loosened that policy, preferring instead to raise interest rates by a full percentage point to make the currency more attractive to foreign investors.
The move showed few signs of success, but triggered instead a further sell-off in both the currency and stocks. One Moscow-based analyst described the policy change in a morning investor note as "opening of Pandora's box."
The ruble-denominated MICEX, where most of Russia's trading takes place, lost 12.6 percent on Tuesday prompting regulators to shut it down until Thursday. The other exchange, RTS, lost 10.7. The RTS was down 6 percent by 11:30 a.m. (0730 GMT) Wednesday morning.
The Central Bank on Tuesday widened the ruble's trading corridor by 30 kopecks, or 0.30 of a ruble, in a move seen as a concession to a weakening economy and the falling price of oil.
Russia had poured billions of dollars from foreign currency reserves to buy rubles and keep it from falling below 30.40 against the dollar in a practice called a "managed float."
The Central Bank had said previously it wanted to gradually move away from such practices and rely instead on interest rate policy to control the value of the ruble.
The Central Bank in fact raised its key interest rate on Tuesday by a full percentage point, to 12 percent, in an effort to stem breakneck capital flight, increase the appeal of the ruble and ease inflation as the country faces its worst financial crisis in a decade.
Official reports say capital worth $50 billion fled Russia in October.
Analysts have said the government will have to move carefully to avoid triggering panic among Russians, whose confidence is being eroded after an oil-fueled eight-year boom.


Updated : 2021-10-21 01:18 GMT+08:00