The Russian central bank (CBR) has moved the floating trading band for the rouble for the second time today and the 16th time since the middle of last month, allowing the rouble to rally to a new high.

The latest shift by the CBR moves the band to 34.20-37.20 against the euro-dollar basket from its previous position of 34.25-37.25. Dealers reported this after the bank bought another US$700 million in interventions at the boundary of the band.

The rouble is rallying for a number of reasons:

Firstly, the price of oil has surged over the past month and as this is Russia's key export, this price rise has boosted confidence in the economy.

Secondly, although the CBR has cut the benchmark refi rate to a record low of 8.5 per cent it is still far higher than most other G8 economies so Russia currently offers attractive yields to investors.

Thirdly, exporters need to pay domestic taxes in roubles and as the economy improves, there are more taxes to pay and more currency is needed.

Finally, as confidence in some European economies falls, the appeal of emerging markets such as Russia grows. Flows to Russia Equity Funds, for example, were at US$411 million last week, a 20-week high.