The rouble descended into freefall during trading today despite the Russian central bank's drastic action which hiked interest rates from 10.5 per cent to 17 per cent late last night.
After starting the day with a brief rally, the Russian currency dropped again and was down 12.2 per cent to 73 roubles per dollar at pixel time.
Russia's central bank has said it plans to enact more measures to stabilise domestic markets following the rate hike. First deputy governor Sergey Shvetsov told Reuters that the situation of the Russian foreign exchange and stock market was "critical".
Moscow later announced Russian Dmitry Medvedev met with a group of officials including finance minister Anton Siluanov and central bank chief Elvira Nabiullina but did not give further details.
The currency's collapse has been attributed to falling oil prices and concerns over further sanctions from the US. Today, Brent crude fell below the $60 per barrel to $59.75 a barrel, leaving it at a five-and-a-half year low.
A falling currency increases the burden of foreign debt repayments and some analysts have said Russia could be heading for default. It also makes imported goods more expensive pushing inflation rates higher.
But while Russia's central bank raised rates to stem the currency's freefall and curtail inflation this brings more headaches.
Hiking interest rates slows economic growth and investors fearing a slowdown have been pulling capital out of the country. The CBR expects $120bn (£76.7bn) to leave the economy in 2014.
The FTSE 100 has crashed in and out of positive and negative territory amid volatile trading, as the blue chip index, dominated by oil and gas companies, has been particularly affected by the oil price slide.
Mid-afternoon trade was lifted by positive UK inflation data which helped calm some of the turmoil caused by Russia.
Russia at a glance
- Annual gross domestic product (GDP) growth slowed to 0.7 per cent in the three months to June. It was 4.8 per cent in the first three months of 2012.
- The rouble was recently down about 11 per cent, nearing 73 roubles per dollar.
- Today Brent crude dropped by more than a dollar to $59.75 a barrel - nearly half the level it was in June.
- Inflation is forecast by the central bank to surpass 10 per cent next year.
- Russia raised interest rates 6.5 percentage points to 17 per cent in the early hours of this morning.