MOSCOW: Russia’s central bank announced emergency measures on Wednesday after the ruble slumped to its lowest level against the US dollar in over two-and-a-half years. Fears of a major escalation in the almost three-year Ukraine conflict have hammered the Russian currency in recent weeks, with fresh Western sanctions adding to the strain. The central bank said Wednesday it would stop purchasing foreign currency on the domestic foreign exchange market from Thursday until the end of the year.

The move means Russia is suspending part of its budget rule, a mechanism that sees it buy or sell foreign currency dependent on oil revenues, in order to either replenish its forex reserves or cover a budget shortfall. “The decision was taken in order to reduce the volatility of financial markets,” the central bank said. By stopping buying foreign currency, the central bank is reducing the supply of rubles on the market, hoping to prop up its value. The regulator set its official exchange rate for the ruble at 108 against the US dollar, its weakest level since March 17, 2022. On foreign exchange markets, the currency was even weaker, beyond 110 at some points on Wednesday. 

Seen by many Russians as a bellwether for the country’s economic health, the ruble traded at around 75-80 to the dollar before the start of the conflict. Russia’s finance minister on Tuesday sought to brush off concerns over the currency’s sharp drop, saying it would be “very conducive to exports”. A weaker currency means Moscow’s goods appear cheaper on the world market. But it also means Russians have to pay more for imports, threatening to push up already high inflation at home. The central bank has raised interest rates to 21 percent, their highest in more than two decades, to try to bring price rises under control. - AFP