The ruble hit a historic low on Wednesday as the dollar climbed past the 82 ruble mark for the first time, exceeding the levels seen during the shock plunge of the Russian currency in December 2014.
After a day of relative calm, the ruble resumed its downward spiral as oil prices struck fresh 12-year lows, breaking through the previous record low of 80.1 rubles to the dollar it hit on December 16, 2014.
The ruble also weakened past 90 against the euro, its lowest level since December 2014.
As gas and oil account for more than a half of Russian budget revenues, the collapse in global energy prices has quickly led to pressure on the currency.
The Russian central bank said Wednesday it wasn't considering hiking interest rates to halt the slump in the value of the ruble as it did in December 2014, when it pushed its interest rate to 17 percent in a dramatic midnight move.
"Currently the adjustment of the market value is happening rather smoothly," the Bank of Russia said in a statement, adding the ruble's weakening had an "objective character" because of the country's dependence on energy exports.
But the worsening economic outlook presents a serious challenge for President Vladimir Putin, whose popularity with voters has been based on years of economic stability and relative prosperity.
So far Kremlin strongman has largely made light of the economic crisis and has pointed out that a weaker ruble opens up new opportunities for Russia.
He joked about seeing so many government officials at a meeting on Wednesday, the same day the World Economic Forum of global business and political elites opened in the Swiss ski resort of Davos.
"They used to go there with great pleasure but are not going now. Apparently, they don't have enough money for the tickets," he said with a smile.
But the crisis has had a much wider impact than on the travel budget of Russian officials.
Low oil prices have complicated the government's ability to meet its social spending commitments, while the eroding value of the ruble makes it more difficult for ordinary Russians to buy imported food and goods.
- 'Harder life' -
"Even an ordinary person already understands -- if the ruble falls, prices will grow and life will become harder," said Igor Nikolayev, director of the FBK Grant Thornton Institute of Strategic Analysis.
While Prime Minister Dmitry Medvedev has said that the government will seek to honour its social obligations, he said it will have to "considerably cut" other spending.
The outlook for the Russian economy is darkening. The International Monetary Fund on Tuesday downgraded its forecast for Russia, predicting that the country's economy would contract by 1 percent this year.
The IMF warned that slower Chinese growth, a stronger US dollar and the collapse in oil prices could all wreak further havoc in struggling economies like Russia's.
"The market will be generally driven by global economic sentiment, which does not exactly look hopeful at the moment," said analysts at Alfa Bank.
Western sanctions over the Kremlin's support for the separatist insurgency in Ukraine have all but closed access to foreign borrowing for Russia and exacerbated the crisis.
Moscow's economic sanctions against Turkey over the downing of a Russian bomber at the Syrian border in November has further complicated matters.
Polls and anecdotal evidence show that average Russians have begun saving on food purchases.
Isolated protests have over the past few months been reported in several cities over the planned cancellation of social benefits and companies failing to pay wages on time.
But analysts say that economic hardships have not yet translated into widespread discontent with the Kremlin and many appear to take it on the chin.
Vera Larionova, a 52-year-old Muscovite, said she was not depressed by the falling ruble.
"Priorities are important. If our love for the man is greater than our love for the money then there's a chance we'll survive," she told AFP.