The Ruble on New Lows as Further Sanctions Are Imposed

In onshore trade on Wednesday, Russia’s ruble plummeted to new lows, despite Moscow’s efforts to prop up its devastated economy and ensure hard currency availability in the wake of new economic sanctions sparked by its invasion of Ukraine. The ruble soared to 120.83 to the dollar on the Moscow Exchange following two days of market closure; afterward it clawed back some losses to settle at 120, or 12.5 percent lower than Friday’s closing. After hitting a high of 131 per euro in early trade, it finished 6.3 percent down versus the euro at 127.

Offshore ruble trading was equally weak, with substantial price disparities: the ruble was at 129 to the dollar on Refinitiv. It was at 138 versus the dollar on the EBS platform; down 5.8% from the previous 130 close. Since Russia’s invasion of Ukraine sparked heavy economic sanctions, the country’s financial markets have been in upheaval. The European Union cut links with Belarus’ central bank and leading banks on Wednesday, a supporter of Russia in its invasion of Ukraine.

Rate Adjustments

The central bank’s main interest rate has been more than doubled to 20%; the government has implemented assistance measures; however, Russian assets have been massively dumped; hence, the ruble has lost about 30% of its value versus the dollar in Moscow since Russia launched soldiers into Ukraine on February 24.

The central bank said on Tuesday said that it was providing more crisis support to financial institutions; moreover, banks will not be able to sell foreign money to residents for the next six months, a measure aimed at safeguarding the country’s valuable hard currency. According to the finance ministry, Russian banks will be able to lend to firms managed by non-residents; this will allow businesses to conduct business as normal in Russia. The Moscow Exchange remained closed for equities trading. The last time stocks traded in Moscow was on February 25. According to BMO’s Ma, after the stock market reopens, there’s a risk that prices would fall farther than their longer-term worth; however, that timing will be difficult.