In its biggest fall since January, the ruble broke a psychological barrier by sliding above the 30 rubles to the dollar mark this week, despite predictions from officials and analysts that it wouldn't happen.
Market players seized on the drop and began trading on the assumption of a further fall in the ruble. Observers say that participants on the currency market look to be playing against the national currency in the expectation that the Central Bank won't be able to do anything much to oppose it.
"The Central Bank is looking after its gold reserves and trying to get them to what it sees as the ideal mark of $45 billion," said Alexander Shokhin, head of the Duma committee on lending institutions and financial markets. "If they spend $1 billion to $1.5 billion a week on supporting the ruble, it will be harder to achieve this."
This could explain why the Central Bank relaxed pressure on the market last week and stopped trying to keep the ruble below 30 rubles to a dollar.
"Letting the ruble slide gradually in keeping with the inflation rate looks like a justified strategy that also gives some support to exporters," Shokhin said.
The Central Bank's position weakened in many respects after it reduced mandatory export currency earnings sales from 75 percent to 50 percent in July. Now, with demand for foreign currency high, the Central Bank finds itself having to give way under pressure from market players.
Head of the Central Bank Viktor Gerashchenko had warned on many occasions that reducing the mandatory export earnings sales requirement would lead to "certain negative consequences," namely, capital flight from Russia. "We have, in essence, allowed economic agents to open currency positions against the national currency," Gerashchenko said.
But Gerashchenko says the ruble is not in danger of any sharp fluctuations, despite instability due to the drop in world oil prices. "I don't think the possible decrease of oil prices to a critical threshold will make a great impact on the ruble exchange rate. I think the exchange rate will be quite stable," he said.
The most likely scenario is that the ruble will slide a little further before the end of the year and reach around 30.30 rubles to the dollar, observers say. Currency traders, meanwhile, think everything depends on the Central Bank.
"The exchange rate will be quite stable, and we have the means to keep it in check," Gerashchenko said.
"We can stay at 30.20 rubles for a week or 10 days. The Central Bank has the means to keep the exchange rate where it needs it," said Pavel Drozdov, a trader at Avangard Bank.
The exchange rate will probably stabilize toward the end of next week when the banks take a break for the holiday season, experts say. The ruble will then probably undergo its traditional January drop and slide to 30.60 to 30.70 a dollar.
"In January, the exchange rate traditionally makes a jump," Shokhin said.
A lot will depend on what action OPEC takes regarding oil prices. Oil prices are forecast to fluctuate between $19-$20 a barrel over the next two months, which will make it difficult for the Central Bank to increase gold reserves quickly.