The Russian ruble is in a tailspin and measures to prop it up have come to naught. The currency dropped more than 10 percent for the second day on Tuesday, recording its most severe drop since the 1998 Russian financial crisis. It regained a bit of ground later in the day.
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The Russian central bank tried to shore up the currency with a rate hike, but when that proved ineffectual, confidence in the bank evaporated and the sellers piled on. The ruble opened around 10 percent stronger against the dollar following the overnight 650-basis-point rate hike, but it reversed gains in early trade and fell to record lows, pushing losses this year against the dollar to over 50 percent. At 0637 ET, the ruble was down over 11 percent against the dollar at 73.00 after dipping past 74 rubles per dollar for the first time. It was more than 15 percent weaker versus the euro at 92.99, dragged lower against both currencies by falling oil prices, increasing market panic and Western sanctions over Ukraine. The Central Bank of Russia (CBR) unexpectedly hiked rates by 650 basis points in a midnight session on Monday evening. It raised its base rate to 17 percent from 10.5 percent after the ruble suffered its worst trading day for 15 years.

Russia is now in a worse position than during the 2008 crisis, Mr Medvedev said, as “a number of countries are effectively hampering the development of our economy”.

The outlook for the Russian economy and the rouble’s strength have been lowered by a series of sanctions over the Ukraine crisis, and the falling value of oil, on which the Russian economy has become reliant.

The rouble has rebounded to its strongest level in more than two-weeks, driven by soft government controls of the currency.

Whereas oil was trading at around $110 per barrel in June, a barrel of Brent crude now costs around $60

As the price of oil has fallen, the room for further sanctions against Russia has risen, as the consequences of Mr Putin turning off oil exports in response would be more muted.

The proportion of economists polled by Bloomberg that expect the US to implement direct economic sanctions against Russia, as opposed to those targeted at companies and individuals, rose from 29pc to 35pc.


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