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Russian President Putin is pictured during his meeting with Serbian President Nikolic in Belgrade Reuters

Russia's credit rating has been cut to one notch above the lowest investment grade by Moody's as the country's economy suffers from Western sanctions.

The ruble dropped 0.2% to 40.84 to the dollar after the ratings agency cut Russia's sovereign debt from Baa1 to Baa2, while maintaining a negative outlook on the rating.

Russia sold around $13bn (£8.1bn, €10.2bn) of its foreign currency reserves in October in a bid to prop up its currency amid gloomy economic prospects and sanctions over its role in the Ukraine crisis.

A shaky ceasefire is holding in eastern Ukraine where pro-Russian rebels have sought to break away from Kiev.

Western powers have imposed a range of incremental sanctions against Moscow since it annexed the Crimea peninsula from Ukraine in March.

The sanctions have sparked a wave of capital flight from Russia, while falling oil prices in recent months have dealt a further blow to Russia's economic outlook. The Kremlin relies on taxes from energy sales for around 45% of the national budget.

The downgrade follows a similar move by the Standard and Poor's ratings agency, which cut Russia's credit rating to BBB- in April.