Ruble Plunges More Than 25 Percent Against Dollar
MOSCOW (AP) _ The Russian ruble plunged anew today, losing more than a quarter of its value against the dollar in the worst one-day drop since trading began in 1992.
The ruble closed at 3,926 to the dollar, down 27.4 percent from late Monday’s 3,081, on the Moscow Interbank Currency Exchange.
″This is disastrous, unprecedented,″ said Yevgeny Smirnov, a trader at the Russian Commercial Bank. ″Banks may close today because it’s impossible for them to give quotes .... No one knows what to expect.″
Russia’s central bank, which has spent billions of dollars to prop up the ruble this year, began stepping back from the market last month, leading to panic selling by traders.
The bank returned to the market in the final minutes of trading today, spending $80 million to prevent the ruble from sliding below 4,000 to the dollar, chairman Viktor Gerashchenko said.
Traders have been shaken by the bank’s inability or unwillingness to rescue the Russian currency. Russians are buying dollars as a hedge against inflation, which is now running at 7.7 percent a month.
Central bank officials have said they’re merely allowing the market to adjust to a surge in the money supply over the summer. They predict that selling pressure on the ruble won’t last.
A ruble free-fall could endanger Russia’s free-market reforms, scare off foreign investors and increase the risks of a recession.
At the same time, a weaker ruble makes Russian exports more competitive and makes it easier for the Central Bank to pay government debts by converting its dollars.
The government and central bank directors planned emergency meetings to discuss the ruble crisis.
On the streets of Moscow today, many currency exchange booths stopped selling dollars, which were in short supply. Others offered a 1,000-ruble spread, buying dollars for 3,500 rubles but selling them for 4,500 rubles. One bank quoted the dollar at 6,000 rubles
There were other signs of turmoil. Motorists queued up in long lines at gas stations, despite a 17 percent price increase on Monday.
Many kiosks closed so they could increase their prices, but some shopkeepers worried that it wouldn’t help.
″Price hikes will follow immediately,″ said Alexander, a 43-year-old kiosk operator who would not give his last name. ″The end result will be the collapse of small retailers. Demand drops for a week when we raise prices by as little as 10 percent. In this situation, we have to increase our prices by 100 percent.″
A government analyst said the ruble crash would be felt widely.
″This will have a serious effect on all of us,″ said Irina Pavlona, an analyst with the Center for Economic Analysis. ″We are all getting poorer with each trading session.″
At the exchange, today’s panicked selling was interrupted at least once by what authorities called ″technical problems.″
On Monday, the ruble lost 6.4 percent of its value, its largest drop since a government crisis prompted a panic last January. It was also the first time the ruble had fallen below the 3,000 mark.
It took the ruble more than a year to fall from 1,000 to 2,000 against the dollar, from May 1993 to July 1994, but just three months to sink to 3,000. In the past two days of trading alone, the ruble has fallen more than 1,000 points.
The worst previous one-day drop was on Sept. 23, 1993, when the ruble lost 17.9 percent of its value, going from 1,102 to 1,299 per dollar.