The Russian ruble has surged to a 14-month high today as, and, according to Elina Ribakova, chief economist at Citibank (NYSE:C), the central bank of Russia is searching for ways to slow the rise down as investors are looking to the currency as a strong play.
Not even a spurt of rate cuts over the last 11 months or so hasn’t kept the ruble from strengthening, as the central bank made 11 rate cuts since April which have had little effect on slowing the rise of the Russian currency.
Even with the cut in interest rates, they’re still higher than the majority of countries. The 8.5 percent refinancing rate is expected to be decreased much more as the ruble continues to strengthen.
Those watching the situation none of this will be enough to stop the ruble from rising too much, and they may have to place a tax on foreigners investing in the ruble or tighten up their reserve requirements.
Prime Minister Vladimir Putin has called for more regulations to be put in place to deal with the situation, but other leading Russian officials have resisted the reinstatement of capital controls which had been repealed in 2006. The purpose of re-introducing the controls would be to keep the currency from being so enticing to currency speculators.
Ribakova said if controls are put back in place, it probably wouldn’t come till near the end of 2010.
