Russia’s rouble struck a new record low yesterday after fresh falls in world oil prices deepened investors’ worries that the slowdown in the commodity-dependent Russian economy still has further to run.
The rouble set a low of 80.92 to the dollar before trading down 2.8% by 1210 GMT at 80.85. It had lost 2.8% to 88.18 versus the euro.
The previous all-time low was 80.10 roubles per dollar, reached in December 2014 when Russia was in the grips of a financial crisis exacerbated by Western sanctions over the Ukraine crisis.
Unlike during the prior crisis, there was no sign of panic dollar-buying on Moscow streets yesterday.
Many Russian consumers, having spent months already watching the value of the roubles in their pockets fall against the dollar, have adopted a fatalistic approach to the rouble’s decline.
The slide in the currency made it more likely the central bank would have to postpone interest rate cuts badly needed to breathe new life into the economy.
In a country where many consumer goods are imported, the rouble’s drop will also push up inflation, testing the so-far robust public support for President Vladimir Putin in a year when Russia holds a parliamentary election.
Analysts said the rouble is likely to remain on the ropes.
“There’s not a positive catalyst in sight for Russian assets,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London.
“With high inflation, the rouble tanking and sentiment extremely volatile, rate cuts are off the table for the central bank,” Spiro said.
The central bank cut rates aggressively in early 2015 to ease the impact of an economic recession but has been forced to leave them on hold since July, despite the prospects for the economy remaining grim.
The regulator next meets on monetary policy on January 29, and market expectations have recently shifted towards a “hold” decision.
The deep pessimism on Russian markets mirrored falls in Asian and European stocks, as well as declines in emerging-market currencies such as the Turkish lira.
Almost $6tn has been wiped off the value of global stock markets since the start of the year, and worries over the health of the global economy are growing.
For Russia, the roughly 25% fall in Brent crude oil prices since the start of the year is particularly painful, since oil is the key Russian export.
The rouble, by comparison with the oil price, is down by a less severe 9% against the dollar since the start of 2016, in part as it had fallen so steeply since late 2014.
Other Russian assets were also affected. The dollar-denominated RTS share index was down 4.6% to 629 points, while the rouble-based MICEX was 1.8% lower at 1,616 points.