Russia halts foreign currency purchases after the ruble tumbled


ruble 500 banknoteRussia’s central bank announced Wednesday it had halted its purchases of foreign currency on the back of a recent slump by the ruble.

Over the past few months as the ruble stabilised, the bank has been buying up foreign currency to replenish reserves it spent trying to prop up the plunging currency last year.

But officials said they have now halted the purchases due to a “growth of volatility on the domestic currency market” after the ruble plummeted this week to its lowest point since March as global oil prices dropped.

Oleg Kouzmin, an economist at Renaissance Capital, welcomed the central bank’s move as “a very rational and timely decision.”

The ruble picked up slightly following Wednesday’s decision, reaching 59.84 to the dollar.

Economists had warned that the latest slide could see inflation, which cooled slightly to a still-high 15.3 percent last month, creep up again and throw further interest rate cuts into doubt.

The central bank will decide Friday whether to cut its interest rates for the fifth time this year in a bid to breathe life into Russia’s battered economy.

Russia’s economy has slumped into recession on the back of lower oil prices and Western sanctions over Ukraine.

Authorities have claimed that the worst of the crisis has already been reached but the new drop in the ruble has highlighted how volatile the situation remains.