TOKYO: The dollar hit a new record against the ruble in Asia Tuesday as plunging oil prices and geopolitical tensions slam the Russian economy, while worries about the global outlook send investors fleeing for safe investments.
The rout on world crude has sent global equities tumbling, choking any appetite for risky bets -- pushing the yen higher and hitting emerging markets, with the Indonesian rupiah at a new 16-year low.
Russia's central bank earlier Tuesday hiked interest rates from 10.5 percent to 17 percent to halt a slide in the ruble, which has come as the country is battered by slumping oil prices and Western sanctions for Moscow's support for Ukrainian separatists. In Asia Tuesday the dollar bought 64.23 rubles.
Russia has warned the economy could contract nearly five percent next year.
"Oil prices continue to slide, and that is now the chief worry to Russia, which is essentially an oil-exporting economy," Yoshihiro Okumura, general manager at Chibagin Asset Management, told Dow Jones Newswires.
"The creeping fear is that Russia may default, reminding investors of the prior Greek fiscal panic, and require a bailout. Beyond that, a 'domino effect' of worsening fiscal conditions at other oil-exporting nations may take hold.
The Indonesian rupiah sank to 12,864 against the dollar Friday, after tumbling Monday to 12,713.5, its lowest since August 1998, during the Asian financial crisis.
Like other emerging market currencies, the rupiah has been hit by signs of recovery in the American economy that has led to expectations the Federal Reserve will raise interest rates next year, leading investors to return to the relative safety of US markets. The US central bank starts a two-day policy meeting later Tuesday.
"Selling of mainly oil-linked currencies looks to have spread to emerging markets, with some EM currencies falling to record lows against the dollar," National Australia Bank said in a note.
However, unease sent the dollar down against the yen, which is considered a safe bet in times of turmoil.
The greenback bought 117.58 yen against 117.81 yen in New York, while the euro was at 146.43 yen from 146.50 yen.
The European single currency rose to $1.2451 from $1.2435.
Adding to concerns about the global economy, British banking giant HSBC said China's manufacturing activity shrank in December, with its closely watched purchasing managers' index (PMI) hitting a seven-month low.
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