Russian ruble falls to record lows amid new sanctions

Russian ruble and US dollar banknotes are seen in this illustration taken February 24, 2022. REUTERS/Dado Ruvic/Illustration

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March 9 (Reuters) – The Russian ruble fell to record lows in onshore trade on Wednesday despite moves by Moscow to shore up its struggling economy and preserve hard currency availability amid new economic sanctions following its invasion from Ukraine.

After two days of market closure, the ruble jumped to 120.83 to the dollar on the Moscow Stock Exchange before recovering some losses to trade at 116.95 at 1200 GMT – still more than 10% lower than its Friday closing.

It traded around 1% lower against the euro at 119.5 after hitting a record high of 131 per euro in early trading.

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Offshore ruble trading was also thin with wide price disparities: on Refinitiv, the ruble stood at 116.397 to the dollar while the EBS platform showed 129.00.

Chris Turner, global head of markets at ING, said he expected on and offshore trading to remain largely separated as a “function of sanctioned counterparty risk”.

Russian financial markets have been in turmoil since its invasion of Ukraine triggered severe economic sanctions.

The central bank more than doubled its key rate to 20% and the government introduced support measures, but Russian assets have been sold off massively and the ruble is now down around 30% against the dollar at Moscow since Russia sent troops to Ukraine. February 24.

On Tuesday, the central bank said it was offering additional crisis support to financial firms and banned banks from selling foreign currency to its citizens for the next six months, a move aimed at preserving the precious hard currency. in the country. Read more

The move only “further underscored the pressure in a market where the RUB closed at 130 after briefly hitting 175 on Monday,” Rabobank said in a note to clients.

Trading in shares on the Moscow Stock Exchange remained closed. The shares were last traded in Moscow on February 25.

Russia’s 5-year credit default swaps – a measure of the cost of insuring exposure to the country – soared to a record 2,905 basis points.

Inflation data slated for release later today could shed light on the impact of Western capitals’ sanctions and Moscow’s countermeasures on the Russian economy.

Moscow will release Consumer Price Inflation (RUCPIY=ECI), (RUCPI=ECI) for February in annual and monthly terms and for the week to March 4, the latter expected to show the impact of the recent sharp deterioration ruble.

Michael Metcalfe, global head of macro strategy at State Street Global Markets, said in a research note that there were signs that prices in Russia had risen sharply since the ruble fell – more than in previous currency meltdowns. .

“If sustained in the coming weeks and months, (this rate) could see Russia’s annual inflation rate nearly double in the coming months,” Metcalfe wrote.

Even before the conflict in Ukraine, Russian inflation was well above the central bank’s 4% target, accelerating to around 8.7% in January, its highest level since early 2016. S&P Global Ratings said it expected that Russian inflation reaches 13.5% this year. Read more

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Reuters reporting; edited by William Maclean and Bernadette Baum

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