The ruble has lost more than 10 percent against the dollar since the beginning of 2014. The previous record low of 37.0005 was set in March.
“Investors fear new economic sanctions against the Russian Federation and will be monitoring the West’s reaction to the appeals of the Ukrainian authorities. If the EU stance is less dogmatic, the Russian markets have a chance to increase,” Marianna Tkachenko, a portfolio manager at Allianz Investments, told Kommersant newspaper.
The ruble slid to 48.86 against the euro on the Moscow Exchange but hasn’t reached record lows set in March. “The euro’s tendency to weaken against the dollar also puts pressure on the ruble,” VTB Capital Analyst Maksim Korovin told RIA Novosti.
The currency made some gains on Friday afternoon, trading below 37 rubles, before again hitting 37 in the evening. At 7:00pm MSK, the ruble was valued at 37.10 against the dollar. Analysts said it could remain volatile amid developing events in Ukraine.
Heightened rhetoric from the West alleging a Russian military incursion into Ukrainian territory is believed to have triggered the drastic drop.
On Thursday, President Barack Obama said he may widen sanctions against Russia over the latest allegations.
Russia denied the claims and the OSCE confirmed that it had no evidence of a Russian military presence in Ukraine. Russia’s ruble is sensitive to political events, and has experienced great fluctuation in recent years.
The ruble’s value greatly depends on whether Russia’s Central Bank decides to intervene on behalf of the currency or not. The bank wants the overvalued currency to be free-floating, and has loosened its monetary controls.
“Ruble prospects are rather neutral. On the one hand, the regulator will not intervene until the dual currency basket (dollar and euro) reached 44.40 rubles (about 5 percent). Thus the ruble remains in the floating range and can continue to weaken in the case of continued political risks,” Korovin said.
If the Central Bank decides to spend billions of dollars to prop-up the sliding ruble, it will have to tighten monetary policy. Analysts predict this is likely if the dollar rate increases by another 2 rubles.
Russia’s economy grew 0.8 percent in the second quarter, beating predictions it would contract into a technical recession. Growth is still the slowest since 2009.