Speculators force Russia rouble to extend slide If Russian policy makers were hoping to halt a speculative attack on the rouble when they raised interest rates on Friday, they will have to think again. The currency rallied for about two minutes after the central bank announced a much bigger increase than expected in its benchmark rate. But despite rumours that had lifted the rouble in the run-up to the meeting, it did not announce any change to its policy on the exchange rate - and the currency swiftly slumped again. On Monday, with Russian markets closed for holidays, it extended those losses, falling around 1.3 per cent to Rbs43.5670 against the dollar. It has now dropped almost 25 per cent against the greenback since the start of the year and traders are unwilling to bet on a recovery: in options markets, the cost of protecting against further swings in the exchange rate over the next month has hit a five-year high. Analysts say a weaker rouble helps Russia's economy up to a point: it will support domestic manufacturers and offset the impact of lower oil prices on budget revenues. But it is stoking inflation and fuelling capital flight - and there is a risk that further depreciation could provoke a stampede into dollars by households trying to preserve the value of their savings. Although the central bank underlined the effect of depreciation on inflation, it has so far stuck to plans to let the rouble float freely at the start of 2015. Until then, it is committed to sell $350m each time the rouble falls outside a set trading band - a policy that drained some $25bn from its reserves in October alone. The problem is that this predictable pattern of interventions makes the rouble an easy target for speculators. Its fall reflects stagnant growth, weaker oil prices and western sanctions that have sparked capital flight and an acute shortage of dollar liquidity. But analysts say this is not enough to explain the relentless pace of depreciation - and that the central bank may soon be forced to take more direct action to defend the currency. "The foreign exchange market is still lacking two-way risk," said Vladimir Pantyushin, economist at Sberbank, who thinks the central bank could soon adjust its policy on intervention, perhaps by widening the rouble's trading band and cutting the amount it spends when the band is breached. "The rouble has been subject to a speculative attack," wrote Jacob Nell, economist at Morgan Stanley, who thinks the central bank has already done enough to prove its inflation-fighting credentials and ease the dollar shortage. If speculative pressure continues, then we would expect discretionary intervention, to create two-way risk and halt the one-way movement in the rouble. Others are more critical. "This was all about trying to defend the rouble and it failed," said Timothy Ash, economist at Standard Bank, of Friday's decision. Unless they do much more, and quickly, things could get out of hand.