Investing.com - The Russian rouble fell to fresh record lows against the dollar and the euro on Wednesday after the country’s central bank announced that it was scaling back interventions aimed at supporting the currency.
USD/RUB hit session highs of 44.95, and was last up 1.19% to 44.25.
The drop in the rouble came after Russia’s central bank said it would cut back on currency market interventions and would allow the ruble’s exchange rate to be set “primarily by market factors”.
In a statement, the bank said it would limit its daily interventions to $350 million per day, well below levels seen in recent weeks, and would allow the ruble to fall further if selling pressure continued.
The bank said limiting the amount of intervention “would prevent the formation of conditions for speculative strategies against the ruble”.
It added that it reserved the right to conduct additional interventions on the currency market, if needed, to respond to “threats to financial stability.”
The announcement came after the bank hiked interest rates by 1.5% to 9.5% on Friday in an effort to stem the depreciation of the ruble and curb inflation.
The rouble has fallen by around 25% against the dollar so far this year as ongoing tensions in eastern Ukraine and broad based risk aversion towards Russia, as well as falling oil prices pressured the currency lower.
Sanctions imposed on Russia by the U.S. and the European Union for what they say is its role in backing separatists in eastern Ukraine have weakened the rouble, caused a spike in inflation and have almost completely shut Russian companies out of the global financial markets.
At the same time, the country’s economy has been hit by falling oil prices. Russia is the world’s second-largest oil exporter and half of its budget revenue is financed by taxes on energy exports.
Elsewhere, EUR/RUB hit highs of 56.41 before retracing some of those gains to trade at 55.30, still up 0.98% for the day.