Rouble jumps on Russia rate hike

Russia's central bank made a drastic interest rate move overnight, raising its key rate from 10.5% to 17%. The bank said the move was to try to ease the rouble's recent fall in value. The rouble has lost almost 50% against the US dollar this year as falling oil prices and Western sanctions continue to weigh on the country's economy.

Before the move, the dollar bought 67 roubles. The rate rise moved it up to 58 against the dollar, although it has since slipped back to 62.
Russia only last week raised rates by 1%, a move that had little impact. On Monday the rouble fell to a new low, prompted by fears the US was considering a fresh set of sanctions against the country for its support for separatists in Ukraine.

Most analysts thought the move would work to curb inflation, which is heading for double figures. But it could cause problems in other areas. Neil Shearing, chief emerging markets economist for Capital Economics, said the rate rise "could prove to be a turning point in the 2014 rouble crisis".
At the same time, activity in China's factory sector shrank in December for the first time in seven months as new orders declined, adding to a spate of data showing more fatigue in the world's second-largest economy and heightening expectations that more stimulus will be needed to avert a sharper economic slowdown.

(Source: BBC, Reuters)