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.