Russia: Central Bank abandons defense of ruble

The ruble’s value plunged once again against other currencies after the Central Bank of Russia returned to a “free-float” on the ruble yesterday. The move was designed to reduce speculative pressure on the currency as it continued to face heavy selling despite a major rate increase last week. The bank did not fully remove itself from the ruble’s defense, stating that it has limited its daily interventions to $350 million, but this is far below recent levels that stood around $2 billion, which has been rapidly depleting Russian foreign reserves.

The ruble’s slide has been increasing recently, as the Central Bank’s policy of intervention immediately following precipitous declines has made the currency an easy target for speculators to make almost-certain bets. The bank is adjusting its strategy, allowing the ruble to drop farther on expectations of the bank reversing its decision. With oil prices nearing $80 a barrel and sanctions looking to stay in place, a pickup on the Russian economy is looking farther away than ever.

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