MOSCOW, Dec. 16 (UPI) -- The value of the Russian ruble fell dramatically in Tuesday trading, to 80 to the dollar, after a government increase in its interest rate failed to revive the currency.
It fell to 80.10, a 19 percent free-fall, before rising to the range of 78 by the close of trading in Moscow. The drop came even through the Bank of Russia raised its key interest rate to 17.5 percent from 10.5 percent in an attempt to strengthen the currency. It is speculated that capital controls, such as government restrictions on the amount of money allowed to leave Russia, may be the bank's next step.
Russia is dealing with a drop in the value of oil, its largest export; economic sanctions by the United States and the European Union; a 9 percent unemployment rate; and the prospect of a recession in 2015. The ruble has lost 54 percent of its value this year.
"I am speechless. What a failure for the central bank. Russia would need to announce capital controls today. That is the last solution," Jean-David Haddad of the Paris investment firm OTCex told Bloomberg News of the decline of the ruble.
Russia maintains the ruble is undervalued on world markets, and awaits a correction. Elvira Nabiullina, chief of the Bank of Russia, said a quick return of the ruble's strength should not be expected.
"The ruble is currently undervalued according to all fundamental parameters and the state of the economy... and the current account, but for the ruble to return to its fundamental exchange rate it would take time," she said.
