Moscow (AFP) - The ruble slumped Friday to a record dollar low and stocks tumbled on investor fears of tighter Western sanctions towards Russia, prompting an appeal by foreign businesses against further ineffective measures.
The ruble slid to 37.072 to the dollar in late trading, breaking its previous record low set in March when Russia annexed Crimea from Ukraine. It was down after closing at 36.75 on Thursday.
The ruble also slid to 48.86 to the euro, from 48.43, but was still stronger than the record low set in March.
The ruble's slide followed calls late Thursday by Western leaders including US President Barack Obama to impose new sanctions on Russia after signs its troops are fighting directly in Ukraine.
An EU summit in Brussels on Saturday could decide on imposing even stronger sanctions.
Russian President Vladmir Putin remained defiant, symbolically describing the insurgents fighting in eastern Ukraine as the defenders of Novorossiya, or New Russia, a Tsarist-era term for Moscow's former imperial holdings in the region that the Kremlin has revived since annexing Crimea.
The downward trend for the ruble "might continue further if the geopolitical ground remains shaky," analysts at VTB Capital said.
Ukraine's hryvnia, which hit a record dollar low of 13.65 earlier this week, strengthened to 13.61 on the apparent shoring up of Western support.
Russian stocks fell sharply after having tumbled on Thursday. The ruble-denominated MICEX index fell 1.59 percent in late trading and the dollar-based RTS index slumped 2.34 percent.
"Negative headlines coming out of Ukraine are causing negative sentiment again," said analysts at Alfa Bank.
While already slowing, the uncertainty generated by the Ukraine crisis and Western sanctions have brought the Russian economy to the brink of recession.
- 'Sanctions ineffective' -
However the Association of European Businesses (AEB), which has more than 600 members who are investors in both Russia and Ukraine, urged EU leaders not to impose any further punitive measures.
"The previous sanctions were ineffective as they did not change the course of the events," said the group which includes companies such as Volkswagen, Credit Suisse and Statoil.
"Moreover they are deeply damaging to business conditions and to the markets, not only in Russia and Ukraine but also in the EU," they added in a statement.
Initial sanctions imposed by the United States and European Union targeted companies close to the Kremlin but the latest measures included limitations on state-held banks tapping Western capital markets.
The economic impact of the sanctions has been viewed as meagre, and Berenberg Bank's chief economist Holger Schmieding said it was uncertainty that was hitting the markets.
"It is the uncertainty about how far the war will escalate, and what Western response will thus be needed, that hits confidence and business investment," said Schmieding.
Avoiding a war, even at the cost of painful sanctions, would improve the business climate in Europe which has clouded as the standoff has deepened, he said.
"If tougher sanctions could deter Putin from going further, that would actually brighten and not cloud the economic outlook for core Europe," Schmieding said in a note to clients.