Aug. 15, 2023 at 3:47 PM EDT
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6 hours ago
Russian Ruble Slides Back Towards 100 Per Dollar Despite Emergency Rate-Hike
By
Chelsey Dulaney
Russia's ruble is falling back toward 100 per dollar as the impact of the central bank's emergency interest-rate increase fades.
The ruble was down 2% in recent trading, with $1 buying about 99 rubles.
The central bank moved early Tuesday to raise its key rate to 12% from 8.5%. It acted after the ruble slid past 100 to the U.S. dollar on Monday, weakening beyond that threshold for the first time since the weeks after Russia invaded Ukraine.
Analysts were quick to point out that the factors driving down the value of the ruble are largely out of the central bank's control, limiting the impact of its policy changes.
The ruble is being weighed by a shrinking current-account surplus thanks to Western sanctions on Russia's oil-and-gas industry. Big government spending to support the war effort, rising imports and continued capital outflows are also dragging down the ruble.
Normally higher interest rates would boost a currency by attracting inflows from investors in search of yield. That's unlikely in Russia's case, as many investors steer clear of Russian assets.
"The central bank can raise rates but it doesn't change the underlying problem," said BlueBay Asset Management's Timothy Ash. "Whatever they do is just stopgap. The fundamental problem is Russia is facing sanctions."
Live Coverage Feed
6 hours ago
Russian Ruble Slides Back Towards 100 Per Dollar Despite Emergency Rate-Hike
By
Chelsey Dulaney
Russia's ruble is falling back toward 100 per dollar as the impact of the central bank's emergency interest-rate increase fades.
The ruble was down 2% in recent trading, with $1 buying about 99 rubles.
The central bank moved early Tuesday to raise its key rate to 12% from 8.5%. It acted after the ruble slid past 100 to the U.S. dollar on Monday, weakening beyond that threshold for the first time since the weeks after Russia invaded Ukraine.
Analysts were quick to point out that the factors driving down the value of the ruble are largely out of the central bank's control, limiting the impact of its policy changes.
The ruble is being weighed by a shrinking current-account surplus thanks to Western sanctions on Russia's oil-and-gas industry. Big government spending to support the war effort, rising imports and continued capital outflows are also dragging down the ruble.
Normally higher interest rates would boost a currency by attracting inflows from investors in search of yield. That's unlikely in Russia's case, as many investors steer clear of Russian assets.
"The central bank can raise rates but it doesn't change the underlying problem," said BlueBay Asset Management's Timothy Ash. "Whatever they do is just stopgap. The fundamental problem is Russia is facing sanctions."
