'Panic' in Russia as rouble slips to symbolic mark against US dollar

One hundred roubles to the dollar is an important, symbolic threshold for Russians. 

It carries with it fears of financial instability and memories of economic collapse. So when the rouble does hit triple digits, purse strings are tightened and alarm bells ring.

"Panic attack for Russia's currency market", read the headline in Rossiyskaya Gazeta, after the rouble sank to 114 against the dollar on Wednesday.

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According to the daily Kommersant newspaper, the currency news "resembled a war report". It advises readers to "buckle up your roubles".

After falling to its lowest level against the dollar since March 2022, the rouble has now lost a third of its value since August.

This time two years ago, it was hovering around the 60 mark. Fifteen years ago, it was as low as 30.

But these are very different times, of course. The latest drop comes after the US imposed sanctions on Gazprombank, Russia's third-largest lender.

It plays a key role in handling energy payments and was one of the few Russian banks not under sanctions. The new measures against it triggered panic buying on the forex, the foreign exchange market.

State-run tabloid Moskovsky Komsomolets warned "the rouble has lost its brakes", quoting a financial analyst who predicted the dollar rate could reach 120 by the end of December.

The obsession with the exchange rate is a historical hangover. During Soviet times, only the elite were allowed to own foreign currency and it meant a higher standard of living, like holidays abroad and luxury imports at home.

During the chaos and hyperinflation of the 90s, those who didn't have hard currency saw much of their savings wiped out when the rouble was devalued.

So when Russia's currency slides like this, it sparks fears inflation will soar as imports become more expensive.

When the rouble fell below 100 last August, Russia's central bank was forced into an emergency rate rise of 3.5% to 12%. Little more than a year on, that rate is now 21%, its highest level since 2003. Will it go even higher?

Not for now, it seems. Instead, the Central Bank of Russia (CBR) has decided to stop buying foreign currency, hoping that it will stabilise the markets.

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Not that the government is concerned; quite the opposite, it seems.

Commenting on the exchange rate earlier this week, finance minister Anton Siluanov said the weak rouble was "very, very favourable" to exporters.

Some commentators have jumped on the remarks, believing it shows the Kremlin is happy to keep the rouble where it is.

But with inflation already running at around 8%, ordinary Russians are unlikely to share that sentiment.

(c) Sky News 2024: 'Panic' in Russia as rouble slips to symbolic mark against US dollar