Russian Ruble Plunged To Record Low as Oil Price Keep Sinking
Russian economy faced a slowdown with a declining value of its currency ruble. Last week, ruble dipped to all-time record low against dollar. Starting Monday, the currency begins to climb up and reaching its 10-day high.
Continuous sinking of oil price has taken toll on Russia's economy. Last week, the currency hit the all-time record low against dollar, sinking over 4% to 85.99 per dollar on Thursday. While ruble also tumble to 93.7 against euro before climbing to 89.2.
The surprising drop has taken Russias authority by surprise, although the authorities said the plunge was not a collapse. According to The Strait Times, Kremlin spokesman Dmitry Peskov said in an interview with Russian news agency Interfax, "The exchange rate is really changing, the rate is volatile, but it is far from being a collapse." Furthermore the spokesman of president Putin said, "There is no basis to suggest the central bank does not have plans drawn up to avoid a collapse."
Following the unexpected sharp drop, Russian central bank held a meeting on Thursday with chiefs of Russian banks. The head of Russian Central Bank, Elvira Nabiullina cancelled her trip to Davos, Switzerland for World Economic Forum's annual gathering to deal with the issues. Afterward, Russian Central Bank issued a statement, "The Bank of Russia held a working meeting with the leadership of banking associations and several banks regarding the conditions and prospects of banks' crediting of the economy in 2016,"
One condition that made Russia's economy vulnerable to volatility is its reliance on oil and gas. Bloomberg reported that Russia's reliance on oil and natural gas made the country ran a budget deficit of 2.6% in 2015, the highest in five years. Oil and gas sectors took almost half of Russia's fiscal revenue, therefore a change of oil price will affect its economy greatly.
This year, a cheaper oil price will weaken Russia's economy even more.The declining oil price automatically depreciate the national currency, ruble. This will hurt common people the most, because that would make Russian consumers spending more cash in order to maintain their level of consumption.
Fortunately, on Monday the ruble began to recover. The Moscow Times reported that ruble started to regain some of its losses amid surging oil prices, according to Interfax.
On Monday's opening trade, ruble climbed to 76.71 against dollar, gaining the strongest position in ten days. Ruble was also strengthened against the euro at 82.99 against the European currency.
Over reliance on revenue from oil and gas sector have given a negative impact on Russia's economy. As the continuous plunge of oil price has given a pressure to its currency last week. This week, Russian ruble has started to regain its loss after a sharp plunge last week.