The New York Times reports:

By targeting Russia’s central bank with sanctions, experts said, American and European leaders have taken aim at what could be one of President Vladimir V. Putin’s greatest weaknesses: the country’s currency.

In Russian cities, anxious customers started lining up on Sunday in front of A.T.M.s, hoping to withdraw the money they had deposited in banks, fearful it would run out. The panic spread on Monday. To try to restore calm, the Bank of Russia posted a notice on its website: “The volume of bank notes ready for loading into A.T.M.s is more than sufficient. All customer funds on bank accounts are fully preserved and available for any transactions.”

Even before the sanctions were announced over the weekend, the ruble had weakened. On Monday it plunged further, with the value of a single ruble dropping to less than 1 cent at one point. As the value of any currency drops, more people will want to get rid of it by exchanging it for one that is not losing value — and that, in turn, causes its value to drop further.

In Russia today, as the purchasing power of the ruble drops sharply, consumers who hold it are finding that they can buy less with their money. In real terms, they become poorer. Such economic instability could stoke popular unhappiness and even unrest.

“If people trust the currency, the country exists,” said Michael S. Bernstam, a research fellow at the Hoover Institution at Stanford University. “If they don’t, then it goes up in smoke.” [Continue reading…]

The Wall Street Journal reports:

Powerful Western sanctions rocked Russia’s financial system and triggered a spiral in the ruble, drawing the central bank into an emergency doubling of interest rates.

The Russian ruble fell as low as 111 to the U.S. dollar from 83 on Friday, a drop of more than 20% before recovering slightly, on track for its biggest single-day fall on record. But trading was spotty, with local onshore markets frozen by the central bank and markets outside Russia reluctant to trade the currency.

The Bank of Russia took a raft of measures early Monday to protect Russia’s banking system. It raised benchmark rates to 20% from 9.5% in an attempt to attract savings into banks, the largest of which were targeted by Western sanctions and will be all but cut off from international markets.

“The economic reality has changed significantly,” Kremlin spokesman Dmitry Peskov told reporters. “Now it’s important to take actions that minimize the consequences,” he said. “We will do what is in our interests.”

The bank delayed trading on domestic debt and currency markets, making it difficult to assess where the ruble would end up. The central bank blocked the opening of the stock market. It also ordered Russian companies, some of which generate sales for energy products in dollars, to sell 80% of their foreign-currency revenue. The move will create demand for rubles and prevent companies from hoarding dollars. [Continue reading…]