By Jonathan Davies
The Russian rouble is in free-fall. The currency has fallen to all-time lows today (Tuesday) after the Russian central bank increased interest rates to 17%, less than a week after putting them up to 10.5%.
At the time of writing, $1 will buy 80 roubles. The dramatic move to increase interest rates to 17% came after the rouble to 67 to $1.
The 60 rouble mark has previously been described as a "psychological barrier" for Russia. Now it stands much higher.
The increase to 17% did help immediately, bringing the currency down to 58 roubles per $1. But it has since been in free-fall, reaching the 80 mark.
The rouble had already lost more than 50% of its value against the US dollar this year, and the Russian central bank has spent more than $70 billion on trying to boost it.
The chairwoman of the Russian Central Bank, Elvira Nabiullina, said increase to 17% should tackle Russia's high inflation and encourage the public to put more roubles into interest rate-bearing accounts.
"The rouble is currently undervalued according to all fundamental parameters and the state of the economy... and the current account," she said.
"But for the rouble to return to its fundamental exchange rate it would take time."
Philippe Gelis, CEO and co-founder foreign exchange platform, Kantox, said: "The rapid depreciation of the Russian rouble will be a cause for panic amongst European businesses with operations in Russia. Such concern is understandable; their profits are likely to be hit by rising prices within Russia and it is becoming increasingly difficult to move money out of the country.
“The rouble may well experience a further drop, before stabilising. Nonetheless, European companies needn’t rush to remove all operations from Russia. Despite the upheaval, Russia continues to represent a lucrative opportunity for European companies, with its vast population of 140 million people and interest in European products."
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