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Ruble Hits 100 Against the Euro As Currency Collapse Accelerates
The Moscow Times - Breaking News, Business, Culture & Multimedia from Russia
The Russian currency crashed past 100 against the euro Tuesday, the latest milestone in a currency rout that has rapidly gained momentum despite a huge emergency rate hike from the Central Bank.
One ruble became worth less than one euro cent at 3:13 p.m., according to data from the Moscow Exchange. At the same time, the Russian currency plummeted to 80.1 against the U.S. dollar.
The ruble's rout as of Tuesday afternoon in Moscow was the largest one-day fall since the financial crisis of 1998, with the currency losing almost 20 percent in just a few hours of trading.
The Russian currency has now fallen 60 percent against the dollar since the beginning of the year, making it the worst performing currency in the world in 2014.
"The Central Bank's credibility is in tatters,” said Timothy Ash, an emerging markets analyst at Standard Bank, in a note to investors Tuesday.
Earlier Tuesday, the ruble jumped sharply, strengthening as much as 10 percent to 58.1 rubles against the greenback, following an overnight announcement from the Central Bank that it was increasing interest rates to 17 percent from 10.5 percent.
But the gains were short-lived, as oil price weakness and sentiment once again intensified pressure on Russia's tumbling currency.
Brent crude dropped below $60 a barrel, reaching $59.02, a level not seen since 2009 on Tuesday.
Prime Minister Dmitry Medvedev said Tuesday that he would convene a government meeting to discuss the financial situation, Russian news agency Interfax reported.
The ruble's declines Tuesday have compounded a 10 percent fall the day before.
With its largest interest rate hike since the 1990s, the Central Bank bet that a higher return on deposits and savings would make the ruble more attractive, easing the pressure exerted by a declining oil price and Western sanctions on Moscow imposed as a result of the Ukraine crisis.
Central Bank chairwoman Elvira Nabiullina said Tuesday that Russians that they should get used to living in a “new zone,” according to an interview on state-owned television channel Rossiya 24.
The Central Bank, which has already spent over $70 billion of its foreign currency reserves this year defending the ruble, will likely be forced into market interventions, analysts at Sberbank CIB said in a note to investors Tuesday.
“Meaningful currency interventions must follow the huge Central Bank rate hike,” the analysts said.
The ruble's tumble in recent days has sparked heavy criticism of Russia's authorities from investors and lawmakers.
"The fall of the ruble and the equity market is not only a reaction to the low price of oil and sanctions but to a distrust of the government's economic measures," former Finance Minister Alexei Kudrin wrote on Twitter in the early hours of Tuesday morning.
Oleg Nilov, a deputy in Russia's State Duma from the Just Russia party, called for parliament to hold an emergency session with the government in the wake of the Central Bank's interest rate decision, Russian news agency RIA Novosti reported Tuesday.
Others said that the Central Bank and her chairwoman Elvira Nabiullina had disastrously miscalculated the situation.
"Lack of action had left the stability of the very financial system at stake. I am not sure whether Nabiullina can survive this," analyst Ash said.
The Moscow Times - Breaking News, Business, Culture & Multimedia from Russia
The Russian currency crashed past 100 against the euro Tuesday, the latest milestone in a currency rout that has rapidly gained momentum despite a huge emergency rate hike from the Central Bank.
One ruble became worth less than one euro cent at 3:13 p.m., according to data from the Moscow Exchange. At the same time, the Russian currency plummeted to 80.1 against the U.S. dollar.
The ruble's rout as of Tuesday afternoon in Moscow was the largest one-day fall since the financial crisis of 1998, with the currency losing almost 20 percent in just a few hours of trading.
The Russian currency has now fallen 60 percent against the dollar since the beginning of the year, making it the worst performing currency in the world in 2014.
"The Central Bank's credibility is in tatters,” said Timothy Ash, an emerging markets analyst at Standard Bank, in a note to investors Tuesday.
Earlier Tuesday, the ruble jumped sharply, strengthening as much as 10 percent to 58.1 rubles against the greenback, following an overnight announcement from the Central Bank that it was increasing interest rates to 17 percent from 10.5 percent.
But the gains were short-lived, as oil price weakness and sentiment once again intensified pressure on Russia's tumbling currency.
Brent crude dropped below $60 a barrel, reaching $59.02, a level not seen since 2009 on Tuesday.
Prime Minister Dmitry Medvedev said Tuesday that he would convene a government meeting to discuss the financial situation, Russian news agency Interfax reported.
The ruble's declines Tuesday have compounded a 10 percent fall the day before.
With its largest interest rate hike since the 1990s, the Central Bank bet that a higher return on deposits and savings would make the ruble more attractive, easing the pressure exerted by a declining oil price and Western sanctions on Moscow imposed as a result of the Ukraine crisis.
Central Bank chairwoman Elvira Nabiullina said Tuesday that Russians that they should get used to living in a “new zone,” according to an interview on state-owned television channel Rossiya 24.
The Central Bank, which has already spent over $70 billion of its foreign currency reserves this year defending the ruble, will likely be forced into market interventions, analysts at Sberbank CIB said in a note to investors Tuesday.
“Meaningful currency interventions must follow the huge Central Bank rate hike,” the analysts said.
The ruble's tumble in recent days has sparked heavy criticism of Russia's authorities from investors and lawmakers.
"The fall of the ruble and the equity market is not only a reaction to the low price of oil and sanctions but to a distrust of the government's economic measures," former Finance Minister Alexei Kudrin wrote on Twitter in the early hours of Tuesday morning.
Oleg Nilov, a deputy in Russia's State Duma from the Just Russia party, called for parliament to hold an emergency session with the government in the wake of the Central Bank's interest rate decision, Russian news agency RIA Novosti reported Tuesday.
Others said that the Central Bank and her chairwoman Elvira Nabiullina had disastrously miscalculated the situation.
"Lack of action had left the stability of the very financial system at stake. I am not sure whether Nabiullina can survive this," analyst Ash said.
