Rouble suffers huge 1 day decline as oil prices drop

The rouble suffered its largest one-day decline since 1998 on Monday.

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By :  ,  Financial Analyst

The rouble continues to struggle against the backdrop of falling oil prices.

Figures released on Monday (December 1st) showed that the Russian currency had suffered its biggest one-day decline since 1998 sliding nine per cent against the dollar. The rouble did rally following a suspected intervention by the central bank but it has raised further concerns about the future of the Russian economy.

Russia relies on the strong performance of the oil market. As one of the biggest producers in the world it is dependent on revenues from oil exports. This has made it vulnerable to the falling prices which are currently being felt in the industry. Brent crude fell to $67.53 (£42.95) a barrel on Monday, its lowest level since October 2009, while US crude was also down to five-year low of $66.34 a barrel.

Commenting on the rouble situation, Igor Zelentsov, Globex Bank senior trader, said: "Support for the rouble at present can only come from stabilisation of the oil price. Other factors now look secondary and of little significance."

The rouble has been falling considerably against the dollar since January with an almost 40 per cent decline following the turn of the year. Alongside a downturn in oil prices, the Russian economy has also been hit by the sanctions imposed by the West.

US and European Union officials introduced the measures after President Vladimir Putin annexed Crimea and showed support for separatists in areas of eastern Ukraine. This has caused increasing tensions between Russia and the West but it has also put immense pressure on the nation's economy.

Despite not being a member of the Organizations of the Petroleum Exporting Countries (Opec), Russia strongly opposed an option of reducing its oil production. There had been talk a move of this ilk to tackle falling price but Opec agreed to maintain production at 30 million barrels which was originally outlined in December 2011.

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