Russian rouble in worst fall since financial crisis of 1998

The Russian rouble has fallen more than 6% against the dollar today, its worst daily fall since the rouble crisis of 17 August 1998.

It means the currency has lost 25% of its value against the dollar since the beginning of October and 40% in 2014. It has also fallen 5% against the euro today. It has now overtaken the Argentine peso as the worst performing emerging market currency of the year.

Analysts have pointed to the latest slump in oil prices as one of the main reasons for the currency's devaluation. After Opec declined to cut production last week, oil prices have fallen to five-year lows.

Given that oil sales account for 70% of Russia's exports, the slide has had a catastrophic impact on the country's economy. It's estimated that the drop in oil prices since July will trim $100bn from Russia's annual exports volume.

"However, lower oil prices are still only part of the story. The continued conflict in Ukraine and the associated sanctions have fuelled capital flight, which is likely to top $110bn this year, and limited access to dollar funding markets," said Neil Shearing of Capital Economics.

The Bank of Russia floated the rouble on 10 November and despite the latest slump, has resisted calls to intervene in currency markets. It is thought than rather than straight obstinacy, the central bank's tack is more designed to protect public finances. Since oil prices are denominated in dollar, a weakened rouble actually increases their local currency value.

It's been a year to forget for the Russian economy and policymakers in Moscow have been struggling to stop it from nose-diving further.

In November, the Russian government announced measures to clamp down on capital flight, with $200bn (£128bn, €161bn) thought to have left the country through offshore schemes this year alone.

President Vladimir Putin signed a new law amending the tax code and obliging Russian owners of companies registered in tax havens to pay taxes at home. Under the new law, Russian tax residents must declare profits made from foreign companies. A failure to do so will lead to a financial penalty worth 20% of the unpaid tax.

This came after the former Finance Minister and influential Russian economist Alexei Kudrin warned that "excessive conservatism" and populist policies could weaken the economy further still.

"If the president relies only on populist approaches, the country will continue to weaken, and will lose economic growth opportunities," Kudrin wrote in the Vedomosti business newspaper. "It is necessary to avoid excessive conservatism, which limits individual and economic freedom, hinders development."

Kudrin was finance minister until 2009, when he quite over perceived excessive military expenditure. He warned that the ongoing crisis in Ukraine, coupled with the retaliatory sanctions imposed by the west which have frozen Russian companies from Europe's financial markets, will continue to hurt the Russian economy for as long as they remain in place.

"Formal and informal sanctions have already seriously impacted the Russian economy. Bringing back the previous opportunities when it comes to foreign investment and trust in the rouble can be achieved only within seven to 10 years of growth of our economy," he said.