In the 1998 Russian financial crisis, the Russian ruble was sharply devalued before Russia defaulted on domestic debt.
Russia had maintained a trading band for the ruble while facing falling commodity prices, weak tax collection, political uncertainty, and heavy borrowing. On August 17, 1998, the government widened the ruble’s trading range, announced a moratorium on some private foreign debt payments, and effectively defaulted on ruble-denominated domestic debt.
The currency then lost much of its value, damaging banks and businesses with foreign-currency liabilities. The crisis also contributed to the collapse of Long-Term Capital Management, a highly leveraged U.S. hedge fund whose positions were threatened by extreme market movements.
The event is often grouped with the broader emerging-market turmoil that followed the Asian financial crisis. It was not simply a currency crash: sovereign default, banking stress, capital flight, and political instability reinforced one another.