Moscow (AFP) – Russian authorities told people not to panic on Tuesday as the battered ruble plunged to record lows, floored by tensions with the West over Ukraine, new sanctions and falling oil prices.
The national currency fell to 38.82 rubles per dollar after weakening on Monday to below 38 against the dollar for the first time.
It also broke through the symbolic level of 50 rubles per euro for the first time in several months.
The ruble has slumped as investors fret about the impact of ever more stringent Western sanctions on the economy, which is already teetering on the verge of recession.
Ordinary Russians said they were concerned that a weaker ruble would drive up inflation and make foreign trips and foreign currency-denominated purchases an increasingly unaffordable luxury.
Deputy Finance Minister Alexei Moiseyev sought to put on a brave face, saying authorities were taking steps to curb inflation.
“Don’t panic,” he said.
The euro was worth 50.11 rubles at around 1450 GMT on Tuesday, almost one ruble more than its value the day before. The Russian currency is still worth slightly more than at its lowest point in spring of 50.22 rubles to the euro after Russia’s annexation of Crimea in March.
Since the start of September, the dollar has gone up 1.70 rubles in value.
By around 1450 GMT the ruble slightly recovered to 38.71 against the dollar.
1 year USD/RUB chart
“The ruble has come under renewed fire over the past few weeks,” said Capital Economics.
“The latest drop means that the ruble has now fallen by 15 percent against the dollar since the start of the year, the biggest fall of any major emerging market currency with the exception of the Argentine peso.”
The central bank has been cutting its forex intervention as it gears up to allow the national currency to float freely from 2015.
Andrei Nechaev, a professor at Moscow’s Plekhanov University of Economics, said the jump from 36.5 rubles to 38 rubles against the dollar in a matter of days reflected a mood of panic on the currency market, which would likely continue.
“I don’t think it will reach 40 rubles so far but 39 is pretty realistic,” he said.
Banking analyst Mikhail Kuzmin of Investcafe.ru said the central bank did not have the necessary firepower to stop the ruble’s slide, even if it wanted to do so.
“To prop up the ruble exchange rate, you need very significant resources,” he told AFP.
“The central bank could risk spending a lot over a month or two and then the ruble will fall anyway.”
The weak ruble stands to benefit exporters, particularly those selling oil for dollars, which will increase budget revenues, Kuzmin said.
“For the Russian economy there is also a plus — citizens will be more likely to go on holiday and spend money inside the country.”
But ordinary Russians said the weakening ruble was putting the squeeze on their finances.
“It’s a disgrace, I am very much worried,” Larisa Krasnopevtseva, a 53-year Muscovite, told AFP.
“The purchasing power of our ruble is dropping. It means I will rest less, work more and have worse medical care. I don’t know what’s behind this fall but I very much don’t like it.”
Maria Bunina, 57, said she needed US dollars to travel abroad.
“Nearly all my money now is spent on food and utilities,” she told AFP. “A trip to France is my dream but it’s very expensive.”
The United States and European Union last week hit Russia with tough new sanctions over Moscow’s “unacceptable behaviour” in Ukraine.
Russian President Vladimir Putin, who enjoys popular support in a country where the main television channels are state-controlled, dismissed the sanctions and said they would do “more good than harm”.