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free fall

No sympathy from central bank as Russians told to 'get used to it'

The Russian rouble lost 20% in value today, suffering its steepest drop in 16 years.

THE RUSSIAN ROUBLE crashed to new record lows today, losing some 20% in value by the afternoon despite drastic overnight measures by the central bank to hike the key rate.

The rouble hit 80 to the dollar and 100 to the euro on the Moscow Exchange. Overall the Russian currency has lost nearly 60 percent of its value since the start of the year.

The RTS index of the Moscow Exchange fell by 17 percent, to its lowest point since 2009. “We are clearly seeing a speculative attack on the rouble,” an analyst with VTB24 bank Alexei Mikheyev told AFP.

The central bank made a dramatic decision to raise interest rates which was meant to strengthen the currency. It did help it somewhat but the dollar still buys as many as 80 roubles now and the euro as many as 100 roubles.

Investors have dumped their shares amid the risk of a deepening economic crisis that could destabilise the country.

The Guardian reports that the head of the Russian Central Bank, Elvira Nabiullina, told people in the country that they should get used to a new way of life now.

“We have to learn to live in a different zone, to orient ourselves more towards our own sources of financing, and to give a chance to import substitution”.

“Trust me, the choice the central bank’s board of directors made was one between bad and much, much worse,” commented the bank’s first deputy chairman Sergei Shvetsov .

“In the coming days, the situation will be comparable with the toughest period of 2008. I think that the experience we accumulated over the past crises will help us find the right solution and survive this situation. I very much hope so.”

- © AFP 2014 with additional reporting by Michelle Hennessy.

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