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YEREVAN, March 3 (Reuters) - Armenia's central bank said on Tuesday it would float the country's dram currency due to the financial crisis and raise the refinancing rate by 100 basis points to 7.75 percent.
"Due to financial and economic crisis, worsening terms of trade and slowing capital inflows the central bank's board made a decision to limit currency interventions and return to free float policy," the central bank said in a statement.
The bank said it expected the dram's exchange rate to average 360-380 to the dollar versus 306 to the dollar on March 2.
It had already slashed rates by 75 basis points since late 2008.
After a period of strong economic performance, the authorities were forced to take steps after GDP growth halved to 7.2 percent in the first 11 months of 2008 from 13.6 percent in the same period the year before.
Armenia last month agreed a $500 million stabilisation loan from Moscow, and is negotiating with the World Bank, the Asian Development Bank, the EBRD and Black Sea Trade and Development Bank to secure a further $525 million to support Armenian businesses.
The International Monetary Fund approved a three-year, $13.6 million loan programme in November.
Russian firms control a significant chunk of the Armenian economy, and Armenia is likely to feel the impact of its much larger neighbour sliding into its first recession in a decade. (Reporting by Hasmik Mkrtchan, writing by Gleb Bryanski and Matt Robinson)