Russian rates up as rouble falls

Russia's central bank increased its key interest rate to 13% from 12% in an attempt to help stop currency losses.

The rouble headed for its largest weekly fall in five years, and has fallen approximately 1.9% this week.

For the second time this week, Bank Rossii, the country's central bank, widened the rouble's trading band by about 1% or 30 kopeks.

Russia's has spent $148bn (£96.4bn) of its foreign currency reserves since August to stop a fall of the rouble.

The central banks aims to keep the rouble stable against a two-currency basket that is made up of 55% US dollars and 45% euros. Against the dollar, it is down 16% since August.

Steady Devaluation

The current situation for the rouble is not as dire as it was back in 1998 when the currency lost over 70% of its value against the dollar.

Russia finds itself in the position of hiking rates to stop investors fleeing the currency when the large majority of countries around the world are cutting them to deal with the global financial crisis.

Many observers see the central bank finally allowing the currency to head towards a steady devaluation by widening the trading bands this week.

Russia's currency had soared on the back of high oil prices, the country's leading export, and it has been hard-hit by the fall in oil prices.

Russia's main benchmark oil, Ural crude, has been trading consistently below $50 a barrel this week and in late afternoon trading was at $48.61.