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Ruble faces another 'nosedive' after rate cut

Russia's ruble is under renewed pressure after the Central Bank of Russia (CBR) shocked markets with a rate cut, sending the currency to a 2015 low against the U.S. dollar.

The CBR cuts its key interest rate to 15 percent on Friday, just one month after it was hiked to 17 percent, pushing the ruble lower to trade as high as 71.78 versus the dollar.

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A woman walks past a board listing foreign currency rates against the Russian ruble outside an exchange office in central Moscow
Kirill Kudryavtsev I AFP I Getty Images

According to analysts, the move could kick off a fresh wave of volatility for the beleaguered currency, which started the year at 60 against the dollar.

"The CBR is giving up on managing financial stability risks, which I am afraid is a major backtracking step from its recent efforts," said the head of emerging-markets strategy at Societe Generale, Benoit Anne, in a research note on Friday.

"This may backfire soon, however, as all the concerns we had back in November will come back on our radar. The ruble will nosedive, undermining the confidence of investors and the population," he added.

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Friday's move was a particular shock given that last month, the CBR hiked its key interest rate to 17 percent from 10.5 percent, in an effort to stabilize the ruble and defuse the currency crisis that was threatening the economy. December's hike was the central bank's single-biggest increase since 1998.

"I was starting to play with the idea that Russia may well be the next big buying opportunity but I am now forced into backtracking myself," Anne said.

Head of Emerging Markets (ex-Africa) research at Standard Bank, Tim Ash, also saw further ruble weakness on the back of the CBR's move, given the backdrop of weak growth, geopolitical risks, sanctions and persistently low oil prices.

"I guess a read from this is that the CBR is comfortable still with the ruble continuing to take the strain from the factors noted above," Ash said.