The Bank of Russia raised its key interest rate from 9.5% to 20% to prevent the ruble from collapsing after it plunged.
However, the country’s central bank has now lowered the interest rate to 17% suggesting it is stepping back from emergency measures that were enforced.
The value of the currency collapsing erodes its buying power, which could wipe out the savings of ordinary Russians.
How has the ruble been affected by the Ukraine invasion?
The ruble began to fall as Russia invaded Ukraine on Thursday 24 February.
Following European Union, UK and United States sanctions, the ruble tumbled by approximately 30% with Russian banks and companies with Russian operations significantly impacted.
In the early hours of Monday 28 February in Europe, the ruble crashed to its lowest value to date as markets opened.
The Moscow Exchange was offline and inaccessible to the majority of countries worldwide as of 9.30am on Monday.
Russia’s central bank was forced to increase the amount of money it supplies to ATMs after demand for cash reached the highest level since March 2020.
On Monday, the central bank said it had ordered brokers to suspend the execution of all orders by foreign legal entities and individuals to sell Russian investments.
It also said it had yet to decide whether to open markets other than foreign exchange and money markets on Monday.
What will the impact be?
Prices will rise dramatically, and banking collapses, hyperinflation and a deep recession are all potential consequences.
There has already been a rush to the foreign currency ATMs in Russian cities.
In a note to clients, JP Morgan said it expected Russia’s economy to shrink by 20% in the second quarter following the intensified sanctions.
Jeffrey Halley, Asia-based senior market analyst at OANDA, told Reuters: "A bank run has already started in Russia over the weekend... and inflation will immediately spike massively, and the Russian banking system is likely to be in trouble."
But cutting the central bank off from its reserves and limiting Russian institutions’ access to the Swift network will also impact western institutions who face losses from debts that cannot or will not be rapid.
There is also the consequence of Russian retaliation potentially hitting energy exports.
What are some of the financial sanctions on Russia?
One sanction includes blocking some Russian banks from Swift- a system which allows around 11,000 of the world’s financial institutions to communicate and authorise payments.
This is the harshest measure so far imposed to date on Moscow over the Ukraine conflict.
Russia is heavily reliant on the Swift system for its key oil and gas exports.
Other restrictions are aimed at the more than $600 billion in reserves held by Russia’s central bank, with the intention of preventing any support for the struggling ruble.
How much did the ruble to the British pound fall?
The ruble to pound value sharply dropped in line with the Russian currency’s expected crash on Monday 28 February.
One ruble was worth £0.00090 before trading opened, but this fell to £0.00067 at 7.20am UK time.
£1 was worth ₽134 as of 9.49am, rising steeply from 111 rubles to the pound before trading began on Monday.
Russian ruble to Dollar and Euro
Russia’s currency plunged by almost 30% against the dollar on Monday.
One dollar was equal to approximately 101 rubles at 10am on Monday morning – up from 83.53 on Sunday – as the value of one Ruble sank to 1 cent or $0.01.
The euro was worth £0.84 on the pound but went up to ₽114 from ₽94 on Sunday.
As of 10.12am on Monday, one ruble was worth €0.0088 – down from €0.011 on Sunday.
What has the British Government said?
Chancellor Rishi Sunak said on Monday that the measures "demonstrate our determination to apply severe economic sanctions in response to Russia’s invasion of Ukraine".
The UK government said it would "immediately take all necessary steps to bring into effect restrictions to prohibit any UK natural or legal persons from undertaking financial transactions involving the CBR [Russia’s central bank], the Russian National Wealth Fund, and the Ministry of Finance of the Russian Federation".
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