Russian central bank abandons rouble trading band, floats rouble

Russian roubles are seen in this illustration picture taken in Moscow February 17, 2014. REUTERS/Maxim Shemetov

MOSCOW (Reuters) - The Russian central bank said on Monday it had abandoned the rouble’s trading corridor, allowing the currency to float freely.

The rouble has slumped nearly 30 percent against the dollar this year as plunging oil prices and Western sanctions over the Ukraine crisis reduced Russia’s exports and investment inflows.

At 0425 EDT, the rouble was 2.8 percent stronger versus the dollar on the day RUBUTSTN=MCX and 2.6 percent firmer against the euro EURRUBTN-MCX.

The central bank says it will allow the rouble to trade freely as of next year. It had kept the rouble in a nine-rouble trading band against a dollar-euro basket RUS=MCX, gradually limiting its foreign markets interventions.

The central bank said in a statement it would intervene in the foreign currency market if it saw a threat to financial stability.

“As a result of the decision, the rouble’s rate will be formed by market factors that should strengthen the effectiveness of the central bank’s monetary policy,” it said in the statement.

The bank’s governor, Elvira Nabiullina, said on Monday the bank would temporarily limit the amount of rouble liquidity it provides to Russian banks because of what it called speculative operations against the rouble.

Reporting by Lidia Kelly, Elena Fabrichnaya and Alexander Winning; Writing by Lidia Kelly, editing by Timothy Heritage