MOSCOW: Ruble currency of Russia slumped 2.8 percent weaker against US Dollar at 70.70 and fell 2.7 percent to 80.188 percent Euro.
The ruble slumped to the weakest level since panic swept across Russian financial markets last month after a surprise interest-rate cut signaled the central bank no longer considered tackling inflation its primary task.
The currency tumbled as much as 4.3 percent to 71.8465 after borrowing costs were reduced by 200 basis points to 15 percent, in contrast to the expectations of all but one of 32 economists surveyed by Bloomberg. It hasn’t breached 70 since Dec. 17, a day after the currency tumbled past 80 in a rout that wreaked havoc across emerging markets.
The decision underpins the pressure central bank Governor Elvira Nabiullina has come under from government and banking executives to lower borrowing costs that risk deepening a recession as oil slides and fresh sanctions over Ukraine loom. Herman Gref, the head of the nation’s biggest lender, OAO Sberbank, this month warned of an “extremely widespread” banking crisis, while his counterpart at VTB Group, Andrey Kostin, urged policy makers to lower rates to 10 percent.
“The immediate sharp negative reaction of the FX market suggests that such a rapid U-turn could lead to a loss of confidence in the central bank’s policy,” Tatiana Orlova, the chief economist for Russia at Royal Bank of Scotland Group Plc in London, said by e-mail. “The negative ruble market reaction suggests that the cut was premature.”
