The Australian dollar is sharply lower today after the Russian central bank drastically lifted interest rates in order to starve of a further collapse of the rouble reviving fears of their last default in 1998.
At 6.10pm (AEDT) the Australian dollar is trading at US81.55 cents down from US82.44 cents in yesterday’s trade.
Russia’s move to lift interest rates by 650 basis points to 17% was seen as a desperate measure to save the rouble and the currency initially rallied more than 10% after the announcement. The good news however proved to be short lived, as traders digested the news which sent the currency tumbling again to over 80 per US dollar before settling at around 72, after Russia’s finance minister denied speculation that they were considering currency controls as an added protection measure.
The rule would have banned the Russian people form converting roubles into US dollars and placed restrictions on money leaving the country.
The Russian currency has now lost over 50% of its value since the start of the year.
Michal Dybula, from BNP Paribas noted that. “A large-scale run on deposits, once under way, would make capital controls pretty much unavoidable,” and that that “the authorities may start by forcing state-controlled companies to sell foreign assets and repatriate funds”.
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