MOSCOW (AFP) – The Russian central bank announced Wednesday it would limit its support for the ruble, letting the currency which has already taken a hit from the Ukraine crisis sink to a new record low.
After having recently spent billions of dollars per day to support the ruble in a flexible trading band that limited swings in the currency, the Bank of Russia said it would end its unlimited daily interventions to avoid speculation against the currency.
By limiting its daily interventions to $350 million (280 million euros) the central bank is in effect letting the ruble float freely.
The currency immediately tumbled to new record lows.
It weakened as far as 56.36 to the dollar from 44.98 at the start of trading, before recovering somewhat on comments from a senior central bank official that the Bank of Russia would step in in case of severe shocks.
“We have judged it necessary to keep inventions in certain cases … above all to avoid serious shocks on the market,” said Ksenia Yudayeva, one of the Bank of Russia’s first deputy governors, according to news agencies.
She added she expected that she expected a stabilisation of the market “by the end of the year”.
The ruble has shed about a quarter of its value since the beginning of the year as Western sanctions on Russia over its role in the Ukraine crisis have led to a surge in capital flight from the country.