On Wednesday, the Russian rouble weakened further and slipped past 100 to the dollar, heading to record lows. Stock market in Russia continue to be closed. The Russian economy has come under the full weight of Western sanctions following the invasion of Moscow.
For the third day in a row, the ruble was weaker outside Russia, trading at 112 to the dollar on the EBS electronic trading platform; it hit an all-time low of 120 on Monday.
Since the beginning of the Russian invasion, the ruble has tumbled and at one point it lost nearly a third of value in Moscow trading.
Russia has tried to address the crisis with a sharp interest rate hike to 20%, telling companies to convert 80% of their foreign currency revenues on the domestic market as the central bank stopped its own FX interventions due to sanctions that targeted Russia’s state reserves.
Moscow has termed the invasion as a “special operation” saying it does not aim to occupy territory but destroy Ukraine’s military capabilities and capture neo-nazis.
With households and businesses in Russia rushing to convert the falling ruble into foreign currency, banks have raised interest rates for foreign currency deposits.
Sberbank, Russia’s largest lender, is offering to pay 4% on deposits of up to $1,000, while the largest private lender Alfa Bank is offering 8% on three-month dollar deposits.
The crumbling ruble will significantly impact the standard of living in Russia and fuel inflation; western sanctions are also expected to create shortages of essential goods and services including the availability of flights and cars.