Moscow: Russia's central bank on Monday scrapped daily controls on the value of the ruble, allowing the battered currency to float freely in financial markets earlier than planned.
The bank said that effective today it will stop setting daily limits for the ruble's fluctuations and will not have any obligation to intervene in financial markets to support the currency, which has lost nearly half its value against the dollar this year.
To prevent a sharper drop in the ruble, however, the bank said it will be ready to intervene if necessary to fend off "threats to financial stability."
Central bank chief Elvira Nabiullina said in televised remarks that the regulator will "intervene in the market at any moment in the amount necessary to counter speculative demand."
The ruble strengthened sharply on the news, trading up 3.6 per cent at around 45 rubles a dollar in midday trading, after hitting a record low of nearly 48 rubles a dollar last week.
The bank, which had previously planned to let the ruble trade freely starting next year, made the move as the currency has come under sustained pressure in the face of Western sanctions over Ukraine and plummeting oil prices.
The central bank has been eating through its hard currency reserves, spending USD 30 billions of dollars last month alone in a desperate bid to prop up the ruble.
It also has raised its basic interest rate steadily from 5.5 per cent to 9.5 per cent last month to entice investors with higher returns. Despite all this, the ruble kept falling.
Observers said that Russian banks were able to earn easy profits by taking loans from the central bank and buying dollars in the currency markets, a strategy that only helped drive the ruble down further.
Nabiullina said the central bank will introduce restrictions on the amount of loans offered to financial institutions to ease pressure on the ruble.
"We will temporary limit liquidity in rubles, because it's being used not only for financing the economy but also for currency market speculations," she said.