http://time.com/3635534/russia-ruble-interest-rates/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+Business%29
Dec. 16, 2014
Ruble falls another 8% early Tuesday despite emergency 6.5% percent rate hike, while contagion starts to spread
The rout in emerging markets continued Tuesday with Russia again to the fore, as an emergency interest rate hike by the central bank failed to stop panic selling of the local currency, stocks and bonds.
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Selling across emerging markets has intensified and spread out this week as fears about tighter U.S. monetary policy, slowing global growth and country-specific problems in Russia and Ukraine have combined to create a storm which, if not perfect, is at least pretty adequate.
The Federal Reserve’s Open Market Committee meets later this week and is expected by many to drop its commitment to keeping interest rates at their current low level “for an extended period of time,” as the U.S. economy gains strength. That will end a period of nearly six years of nearly free money for global capital markets, raising problems for those who have squandered it in the meantime.
By early afternoon in Moscow, the dollar had surged 8.6% to a new all-time high of 71.26 and the dollar-denominated RTS stock index had fallen 15% to its lowest level since March 2009, as investors ignored the central bank’s decision to raise its key refinancing rate to 17% from 10.5% as of midnight. The pace of selling had eased off by mid-morning, but picked up again as the U.S. woke up.
In a television interview, central bank governor Elvira Nabiullina saidthe ruble was now clearly undervalued, but stressed that Russian companies would be able to repay their foreign debts, one of the biggest concerns among market participants right now.
The ruble had risen by more than 9% initially in response to the central bank’s move, but quickly gave up all its gains as world oil prices–on which Russia depends for its budget–fell further in response to weak economic data from China. The benchmark price of crude fell to its lowest level since April 2009, trading as low as $54.34 a barrel, before rebounding later on more encouraging news out of the Eurozone.
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