The Russian rouble faced a period of volatility as the central bank conducted an emergency meeting and took the decisive step of raising benchmark rates by 350 basis points to 12%. This action aimed to counter the substantial currency losses experienced against the US dollar, a development that pushed the rouble past the 100 threshold against the dollar just a day prior, as reported by Reuters.
The rouble’s value has seen a notable decline of over 20% against the US dollar since the onset of the Ukraine conflict. Following the central bank’s intervention, the currency exhibited a 0.2% decrease, settling at 97.82 against the dollar.
Monday witnessed the rouble approaching its lowest value in 17 months, reaching 101.75, with a brief trading rate of 92.60 the following Tuesday morning. The central bank’s unexpected move spurred market volatility as responses to the intervention unfolded.
Conversely, the rouble displayed a marginal increase of 0.2% against the Euro, trading at 106.93, while maintaining stability at a value of 13.39 against the yuan. Amidst the backdrop of heavy sanctions imposed by Western nations following Russia’s invasion of Ukraine, the rouble’s woes have deepened. The increase in military spending due to the ongoing conflict has exerted additional pressure on the currency.
Addressing the situation, President Vladimir Putin’s economic adviser, Maxim Oreshkin, highlighted the central bank’s capabilities to restore stability and normalize the situation swiftly. Oreshkin emphasized that a strong rouble is essential for the Russian economy, as per Reuters.
This marks the second time the Russian central bank has called an emergency meeting of such magnitude, with the previous instance occurring in late February 2022 following the Russian invasion of Ukraine. During that episode, the central bank raised benchmark interest rates to 20%, which have gradually decreased since. However, rising inflation led to a recent rate hike of 100 basis points to 8.5% last month.