Investing.com - The Russian ruble fell to fresh lows against the dollar on Thursday after the country’s central bank hiked interest rates by 1% in a bid to prop up the currency and stem spiraling inflation.
USD/RUB was up 0.75% to 55.28 from around 55.03 ahead of the decision.
The Central Bank of the Russian Federation raised borrowing costs to 10.5% from 9.5%, which was broadly in line with expectations.
The central bank warned that inflation could exceed 10% in the first quarter of 2015 and also cut its growth forecasts for 2015 and 2016 to almost zero. It said it would continue to raise interest rates to curb rising inflation.
The annual rate of inflation in Russia rose to 9.1% in November despite a series of rate hikes earlier this year.
The ruble has lost 40% of its value against the dollar so far this year, the worst decline since the currency crisis of 1998.
A combination of lower prices for oil, Russia’s main export and western sanctions have weakened the ruble, caused a spike in inflation and almost completely shut Russian companies out of the global financial markets.
The Ukraine crisis and massive capital flight have forced the bank to spend over $70 billion to support the ruble this year. The bank’s foreign currency reserves have fallen to a four-year low of just over $418 billion.
Elsewhere, the ruble also fell to fresh lows against the euro, with EUR/RUB up 0.68% to 68.82.