Russia said the ruble has gotten too strong and now it's tumbling

Woman slip winterREUTERS/Zoran MilichA woman falls while slipping on ice during freezing rain on Roosevelt Island, a borough of Manhattan, in New York January 5, 2014.

The Russian ruble tumbled on Thursday after the Russian Central Bank sent a signal that its currency had gotten too strong.

The currency was down about by as much as 2.7% to 50.6370 rubles to the dollar after closing above 50 per dollar for two days.

In morning trade on Thursday, the ruble was trading at around 50.10 to the dollar.

On Thursday, the Russian Central Bank announced that it would start buying $US100 million to $US200 million per day “to replenish reserves,” but several analysts stated that the move signals that policy makes think the ruble is getting too strong, and that they don’t want it going past 50 per dollar.

“It is clear to us that this decision is motivated by a desire to stabilise the ruble exchange rate at about 50 per dollar,” Alfa Bank analyst Nataliya Orlova told clients, according to The Moscow Times. However, she added that the policy looked negative to her because the “decision calls into question the inflation-targeting strategy.”

The ruble has been the best performing currency this year following the rebound in oil prices and the relatively quiet ceasefire in Ukraine.

“The rally has been a mixed blessing: while easing inflationary pressures, it’s also curtailed export earnings in local-currency terms as analysts project the budget deficit widened to 1 trillion rubles ($US20 billion) in the first four months,” according to Bloomberg.

Ruble us dollarBloombergUSD-Ruble, 6 months.

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