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Russia's ruble hits record low against US dollar

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
Russia’s national currency, the ruble, hits unprecedented lows against the US dollar as global oil prices continue to fall.

Russia’s national currency, the ruble, has hit a historic low against the US dollar as global prices of crude oil, which plays a key role in Russian economy, continue to plummet.

On Wednesday, the value of the US dollar rose above the 80.1 rubles level for the first time, which was higher than the levels seen during the shocking plunge of the Russian currency in December 2014, AFP reported.

After a day during which the value of the Russian currency experienced relative calm, the ruble resumed its nosedive on Wednesday, reaching below the previous record low it had hit on December 16, 2014.

The ruble’s value against European Union’s euro also fell with every ruble being traded at 87.6 against the euro as Asian and European markets suffered another rout.

Russia has been hit hard by the falling global prices of hydrocarbon energy reserves as natural gas and oil account for more than a half of the country’s budget revenues.

"The market will be generally driven by global economic sentiment, which does not exactly look hopeful at the moment," Alfa Bank said in a note to clients on Wednesday.

In December 2014, the Russian currency saw its worst crash, during which it hit unprecedented lows and was traded at over 80 rubles to the dollar and 100 to the euro.

Analysts say another factor undermining the ruble is Western sanctions that have been imposed by the United States and the European Union on Moscow over the Kremlin's alleged support for the separatists in Ukraine. The sanctions have effectively closed Moscow’s access to foreign borrowing, thus exacerbating the crisis with which Russia has been grappling.

Russian President Vladimir Putin has been facing a serious challenge due to worsening economic outlook of the country amid falling oil prices. The situation has worked to the detriment of Putin, whose main means of getting people’s votes has been years of economic stability and relative prosperity.

As a result of the ongoing problems, the International Monetary Fund downgraded its forecast for Russia on Tuesday, predicting that the country's economy would contract by 1 percent during the current year.

The IMF also warned that slowing down of economic growth rate in China, increased value of the US dollar, the drastic fall in global oil prices and political turmoil could all wreak further havoc on such struggling economies as that of Russia.

Prime Minister Dmitry Medvedev has been quoted as saying that while the government will seek to honour its social obligations, it will have to "considerably cut" spending.

Meanwhile, Igor Nikolayev, director of the FBK Grant Thornton Institute of Strategic Analysis, said the falling value of the Russian ruble was not a good sign for the country’s economy as it exacerbated financial risk, leading to lower investment.

"Even an ordinary person already understands -- if the ruble falls, prices will grow and life will become harder," he said.

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