Ellington

MOSCOW (AP) — Russia's Central Bank on Monday scrapped its daily controls on the value of the ruble, allowing the battered currency to float freely in financial markets earlier than planned.

The bank, which had planned to let the ruble trade freely starting next year, made the move as the currency has come under sustained pressure in the face of Western sanctions over Ukraine and plummeting oil prices. The ruble has lost nearly half its value against the dollar this year.

The bank said, effective Monday, it will stop setting daily limits for the ruble's fluctuations and will not have any obligation to intervene in financial markets to support the currency. To prevent a sharper drop in the ruble, however, the bank said it will be ready to intervene if necessary to fend off "threats to financial stability."

Central Bank Chief Elvira Nabiullina said in televised remarks that the regulator will "intervene in the market at any moment in the amount necessary to counter speculative demand."

The ruble strengthened sharply on the news, trading up 3.6 percent at around 45 rubles a dollar in midday trading, after hitting a record low of nearly 48 rubles a dollar last week.

Speaking in Beijing, where he attended the Asia-Pacific Economic Cooperation summit, Russian President Vladimir Putin voiced confidence that the Central Bank's move will help stabilize the ruble.

The Central Bank has been eating through its hard currency reserves, spending $30 billion last month alone in a desperate bid to prop up the ruble. It also has steadily raised its basic interest rate from 5.5 percent to 9.5 percent last month to entice investors with higher returns. Despite all this, the ruble kept falling.

Observers said Russian banks were able to earn easy profits by taking loans from the Central Bank and buying dollars in the currency markets, a strategy that only helped drive the ruble down further.

Nabiullina said the Central Bank will introduce restrictions on the amount of loans offered to financial institutions to ease pressure on the ruble.

"We will temporary limit liquidity in rubles, because it's being used not only for financing the economy but also for currency market speculations," she said.

However, slumping oil prices and uncertainty over when the U.S. and European Union sanctions for Russia's action in Ukraine will likely keep pressure on the ruble.

The Central Bank revised its capital flight forecast for this year, raising it from $90 billion to $128 billion in its financial policy guidelines released Monday.