AFP, Moscow :
The ruble hit a record low against the euro Friday and reached its weakest point against the dollar for nearly five years amid eroding confidence in Russia’s teetering economy.
Traders said the declines were sure to continue against the backdrop of strongly negative investor sentiment about emerging markets and diminishing Central Bank support for Russia’s beleaguered currency.
Russia intends to introduce a fully floating exchange rate starting next year and shift its focus to the fight against persistently high inflation-measures roundly applauded by economists but feared by consumers.
The euro broke through its record strong point of 47.25 against the Russia currency in late Friday afternoon trading to reach 47.35 before retreating in the closing hours.
The single European currency traded around 47.10 rubles in the evening session.
The ruble’s previously low against the single European currency came in the worst months of Russia’s financial crisis in early 2009.
The dollar had also gained more than one percent to reach 34.50 rubles on the Moscow Exchange before retreating to 34.40.
Traders said the latest bout of selling accelerated after Economy Minister Alexei Ulyukayev was quoted as saying on Thursday that the ruble was more likely to weaken than strengthen in the coming weeks. Finance Minister Anton Siluanov told Moscow Echo radio on Friday that he also “sees no problem” with the current ruble exchange rate.
“This is the policy of the Central Bank and the financial authorities-to make the exchange rate more flexible,” Siluanov said.
The Central Bank eliminated some of its support measures for the ruble earlier this month and no longer spends $60 million (44 million euros) a day on “targeted” interventionist measures.
It still makes between $200 million and $400 million a day in ruble purchases when the Russian currency slips outside the bounds of a predetermined trading band.
But the Central Bank reserves the right to shift that trading corridor to a higher exchange rate as pressure on the ruble mounts-a step it has taken repeatedly this year.
The ruble’s fate carries a much wider political dimension in Russia because of a painful post-Soviet devaluation in the early 1990s that wiped the saving of tens of millions and made many question the wisdom of market reforms.
The currency also lost a third of its value over a matter of days when Russia defaulted on its foreign debt in August 1998. The global financial crisis a decade later put the currency under further strain.
