The ruble hit a record low of 80 to the dollar — down a catastrophic 24 percent — before making a modest improvement to trade at 72 to the dollar by late Tuesday afternoon. The market plunge defied a whopping pre-dawn interest rate hike of 6.5 percentage points by Russia’s Central Bank aimed at defending the currency.
SHOP TILL YOU DROP
The ruble’s collapse spurred Russians to rush out and buy imported cars, refrigerators, washing machines, TV sets and other major appliances in a bid to spend their rubles before stores put on new higher price tags.
“Now is the exact time to make all the purchases you’ve been putting off, because tomorrow there may already be another price,” said Alexei Malakhov, a 27-year old IT worker who bought a Google phone for 18,000 rubles ($250) at a Moscow electronics store.
Malakhov said he bought a washing machine two weeks ago, and its price has swelled by 25 percent since then.
“We haven’t bought everything we need, but there’s no money left,” he lamented.
Dmitry Rayenko, who works in sports marketing, bought a stove and a coffee maker.
“You have to be philosophical about it: Buy what you need now,” the 45-year-old said. “We’re in an economic war, so it’s unlikely it will get better in the near term.”
Along with Western sanctions, the ruble’s depreciation has been driven by a slump in the price of oil to below $56 a barrel from a summer high of $107. The bulk of the government’s revenues come from oil.
Yet the selling went beyond what would be justified by the mere fall in oil prices.
“It’s easy to use the word, ‘panic,’ but I think that’s what it has been,” said Philip Hanson, an expert on the Russian economy at the Royal Institute of International Affairs in London.
“The fall in the ruble is more dramatic than the fall in the price of oil would indicate, and I think there’s a crisis of confidence, if you like, a crisis of trust, on the part of everybody involved in the market.”
He said that would include companies seeking to move funds into dollars and ordinary citizens trying to shield their savings by exchanging rubles.