March 5, 2014 7:59 am

Russia spends $11bn supporting rouble

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Russia’s central bank spent $11.3bn supporting the rouble on Monday, as investors pulled their money out the country following the escalation of the crisis in Ukraine over the weekend, writes Jack Farchy in Moscow.

The size of the intervention, which was above most traders’ estimates, was reported on the central bank’s website on Wednesday.

It is one of Russia’s largest foreign currency interventions on record. By comparison, the central bank spent $57bn in the entire month of December 2008 at the height of the financial crisis.

The $11.3bn intervention is equivalent to 2.3 per cent of Russia’s $493bn foreign exchange reserves.

The rouble stabilised on Wednesday morning, trading broadly flat against the dollar at Rbs36.11 after hitting a record low on Monday, following tentative signs of a reduction of tensions between Russia and the west.

The central bank adjusted its intervention policy on Monday to allow it to spend $1.5bn before adjusting the rouble trading range, up from $350m previously.

It also hiked interest rates from 5.5 to 7 per cent in order, it said, to combat inflation and financial instability.

The near slide in the rouble so far this year has raised fears of inflation in Russia, where people have painful memories of previous episodes of currency devaluation in 1997-98 and 2008-09.

Russian stocks, meanwhile, slipped on Wednesday, the rouble-denominated Micex index down 1 per cent at 1,343 and the dollar-denominated RTS 1.1 per cent lower at 1,171.

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