MOSCOW (Reuters) - The ruble slumped to new record lows on Thursday, threatening more hardship for ordinary Russians and prompting some to stock up on dollars as the Kremlin denied the currency was collapsing.
At one point the rouble had chalked up one of its biggest intraday drops in around a year, smashing through 83 per dollar for the first time and trading as low as 86, though it later recovered some ground.
Its slide adds to the woes of an economy, squeezed by Western sanctions, that shrank by an estimated 3.9 percent last year. It will also keep inflation high, because many of the products Russians consume are imported, and may force the central bank to postpone interest rate cuts badly needed to stimulate growth.
A cashier at an exchange booth on Moscow’s central Tverskaya Street said clients had been buying more hard currency than usual in amounts of around $100.
“People are afraid. They are buying dollars for a black day,” the cashier said, using a Russian idiom.
Yet there was little sign of any souring of attitudes toward President Vladimir Putin, with people instead blaming global economic trends or a Western plot.
Magomed, a businessman walking along the upmarket Stoleshnikov Lane in central Moscow, said Western countries were deliberately driving the rouble lower. “But we will defeat them. Russia is too large.”
By 1515 GMT the rouble was trading around 83.63 to the dollar. While collapsing oil prices have been the main culprit in its almost 60 percent fall against the U.S. currency in the past 18 months, on Thursday crude oil benchmark Brent was higher, around $28.35 a barrel.
Kremlin spokesman Dmitry Peskov said Putin was being briefed about the currency moves, but that the central bank had the situation in hand. “The rate is volatile, but it is far from being a collapse,” he said.
Currency dealers characterized the pressure on the currency as a “speculative attack”.
“PEOPLE ARE RESIGNED”
“Many people are resigned to the fact the currency is falling, the sense is that it’s too late to do anything,” said Chris Weafer, senior partner at Macro Advisory consultancy in Moscow.
Major Russian banks said the volume of currency-exchange operations by individuals had not increased dramatically in recent days, and a Reuters reporter saw no long queues in bureaux de change in central Moscow.
On Wednesday, holders of dollar mortgages stormed an office of Delta Credit bank in the capital, demanding that their mortgage agreements be reviewed.
Express-Volga, a bank based in the Russian provincial city of Saratov, said it would limit its operations with foreign currency from Feb. 1 due to market volatility.
Analysts said investors had added to bets against the rouble after the central bank signaled it was unlikely to actively intervene to defend the currency.
On Wednesday, the central bank said the ruble’s weakening had an “objective character” and was taking place “smoothly”.
Natalia Orlova, economist at Alfa Bank, said in a note the market had taken the central bank’s comments, as well as those by the Kremlin, as a sign the rouble would be the authorities’ main tool to shield the budget from falling oil prices.
A weaker rouble increases the rouble value of the country’s energy sales, insulating the budget.
“The bad news, however, is that oil still appears to have room to go lower, and we believe that touching $20 a barrel is a possibility,” Orlova said. “In this case we would expect the rouble exchange rate to decline to 90-95 per dollar.”
For rouble poll data see reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/fx-polls?RIC=RUB=
Russia in graphics: link.reuters.com/dun63s
Additional reporting by Vladimir Abramov, Oksana Kobzeva, Elena Fabrichnaya and Gleb Stolyarov; Editing by Jason Bush, Christian Lowe and Mark Trevelyan