The CBR's move came after a torrid day for the Russian currency when the rouble lost another 10% of its value against the dollar, bringing the total loss of the currency’s value against the dollar this year to around 50%. The rouble was trading around Rb74 to the dollar on Tuesday morning.
But after a brief rally on Tuesday morning, the rouble continued its fall and by mid-morning was 3% weaker on the day
The country, which has been embroiled in a conflict with Ukraine for much of this year over its support for separatists in the country and its annexation of Ukraine's Crimea region, has seen many of its state owned institutions sanctioned by the US and Europe, severely restricting their ability to raise money in the international debt capital markets.
The slide in the Brent crude oil price from a high of over $110 this summer to under $60 has as a result hit Russia and its currency even harder. The country is in a perfect storm.
For much of this year, the market was split in its views about how quickly Russian yields could rebound. As Russia annexed Crimea, many EM optimists did not expect the US and Europe to carry out threats of far reaching financial sanctions. Some saw a pre-summer rally and expected a post summer one too.
They were wrong, and this month, facing their end investors and their bosses, it will be difficult if not impossible to explain why they chose to keep buying Russia. For some, it will have been a career changing moment, for some perhaps a career ending one.
The brutality of having to face year-end returns will hurt Russia again next year. Many investors have spent this year trying to predict the moment when it was right to buy the country’s debt and equities in the hope of making a killing. Next year, investors’ minds may be more focused on self-preservation than triumph.
Far from bolstering investment in the country, the CBR's move instead showed clearly that there are no more Russia bulls, only frightened bears.