Dmitry Medvedev holds a 1,000 rouble note: he could face serious political consequences if there is a large depreciation of the rouble

Russia’s central bank signalled on Tuesday it was prepared to allow a sharp depreciation of the rouble as it lowered the floor at which it would defend the struggling currency, while capital outflows from the country took their toll on foreign exchange reserves.

The rouble fell by 1 per cent against the combined dollar/euro basket of currencies after the central bank lowered the floor by the same amount.