The Russian rouble fell past 58 to the dollar on Friday, slipping to its weakest point on the day soon after the central bank cut interest rates, for the fourth time this year, by a sharper-than-expected 150 basis points to 8pc.
By 1047 GMT, the rouble was 1.9pc weaker against the dollar at 57.74 after briefly hitting 58.14 in the minutes after the bank’s decision. Against the euro, it eased 1pc to 57.79 on the Moscow Exchange.
The rouble has become the world’s best-performing currency so far this year, boosted by measures – including restrictions on Russian households withdrawing foreign currency savings – taken to shield Russia’s financial system from Western sanctions imposed after Moscow sent troops into Ukraine on Feb 24. Before Feb. 24, the rouble traded near 80 to the dollar and 85 to the euro.
The rouble’s strength has concerned officials as it dents Russia’s income from exports of commodities and other goods priced in dollars and euros.
To ease upside pressure on the currency, Russia relaxed some capital controls this week, allowing banks from designated “unfriendly countries” to trade between foreign currencies on the Russian forex markets.
The central bank, which supports the idea of a free-floating rouble, further eased upside pressure on the currency in the long run by cutting rates and thus trimming yields of rouble-denominated bonds. The bank said it would study the need for further cuts as inflation slows and the economy needs cheaper lending as it dips into recession.
The majority of analysts polled by Reuters in mid-July had expected the central bank to cut the key interest rate by 50 basis points, but the latest data on inflation and inflationary expectations had raised the chances of a sharper cut.
Central Bank Governor Elvira Nabiullina will shed more light on monetary policy and other issues at a media conference at 1200 GMT. The finance ministry plans to return to borrowing via OFZ bonds in September after halting weekly bond auctions in February.
In stock markets, the dollar-denominated RTS index was down 0.1pc at 1,140.9 points. The rouble-based MOEX Russian index was up 1.8pc at 2,089.7.