Ruble hits new record lows despite rate hike

[MOSCOW] The ruble fell on Friday to record lows as oil prices also sank, despite Russia's central bank hiking its interest rate the day before in an attempt to halt the currency's plunge and the resulting price rises.

The ruble fell to record levels of 71 against the euro and 57 against the dollar as the Moscow stock exchange opened, before rallying slightly.

Since the beginning of the year, the ruble has lost 36 per cent of its value against the euro and 42 per cent against the dollar.

The ruble fell on Friday along with oil prices. Oil and gas revenues accounting for more than half of Russia's revenues.

On Thursday the Bank of Russia regulator raised the interest rate for the fifth time this year to 10.5 per cent from 9.5 per cent. The interest rate was 5.5 per cent at the beginning of the year.

The foreign exchange market reacted with disappointment, seeing the rate raise as not enough, Alfa Bank analysts said.

"The market is mainly being driven by the disappointment of what is viewed as overly conservative action on the part of the central bank of Russia in hiking the key rate only 100 basis points," Alfa Bank said in a research note Friday.

The interest rate rise is intended to make the ruble give better yields to savers and fight inflation, which the central bank says will reach 10 per cent by the end of the year.

AFP