Russian authorities have tried a lot of measures recently to slow the depreciation of the currency and nothing seems to have worked and the rate rise by the Russia central bank smells of desperation. The move was driven by the need to limit the risks of devaluation and inflation, with the Rouble having declined by more than iron ore prices in 2014. The size of the rate rise is truly a shock-and-awe approach which has worked previously for several emerging markets central banks over the past 18 months including Turkey, Brazil and South Africa, who were also suffering from a fierce currency sell-off and tried to take short-term speculators out of the market. In essence, the Russian central bank is informing risk speculators that it will be on the other side of a short Russian Rouble position. Russia may not yet be on the brink of a financial crisis but it is close to losing its investment-grade status and a crisis could well follow if things don't rapidly improve and at this stage I don't think they will.



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