July 2, 2022

The Russian ruble fell to a new low in Moscow as sanctions tightened

The Russian ruble fell to a new low in Moscow as sanctions tightened

Russian ruble coins are seen in front of US dollar banknotes in this illustration taken on February 24, 2022. REUTERS/Dado Ruvic/Illustration/Files

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(Reuters) – The Russian ruble fell to a record low in Moscow on Wednesday at $110 per dollar and the stock exchange remained closed as the Russian financial system faltered under the weight of Western sanctions imposed over Moscow’s invasion of Ukraine.

The ruble fell 4.7 percent to 106.02 against the dollar in Moscow trading, recording 110.0 earlier, a record low. It has lost about a third of its value against the dollar since the beginning of the year.

It fell 2.6 percent to end the day at 115.40 against the euro.

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“The volatility of the ruble remains extremely high which may be caused by the instability of foreign exchange sales by exporters combined with continued increased levels of pressure on market players and households in particular,” Raiffeisen said in a note.

For the third day in a row, the ruble was weaker outside Russia, trading at 112 against the dollar on electronic trading platform EBS, but still far from its all-time low of 120 hit on Monday.

Russia responded by doubling interest rates to 20% and telling companies to transfer 80% of their foreign exchange earnings into the domestic market, as the central bank, or CBR, now subject to Western sanctions, halted foreign exchange interventions.

A weaker ruble will affect living standards in Russia and encourage already high inflation, while Western sanctions are expected to lead to shortages of basic goods and services such as cars or flights. Read more

Several global companies have announced plans to exit Russia, while the country’s credit ratings are under pressure as a result of the crisis.

Credit rating agency Moody’s said: “Russia’s sovereign ratings placement under review for rating downgrade was launched due to Russia’s additional military operation in Ukraine which began on February 24, 2022, and the negative credit effects on Russia’s credit position reflect additional and more stringent sanctions being imposed.” .

JP Morgan said a deep recession was in the making for Russia, and the bank was reassessing its regional macro outlook.

“The latest actions targeting CBR have completely changed the picture,” JPMorgan said.

“The large Russian current account surplus could have accommodated large capital outflows, but with the accompanying CBR and SWIFT sanctions, on top of existing restrictions, Russian export earnings are likely to be disrupted, and capital outflows are likely to be immediate.”

Several Russian banks have been banned from the global financial network SWIFT, which facilitates interbank transfers.

As households and businesses in Russia rush to convert the plunging ruble into foreign currency, banks have raised interest rates on foreign currency deposits.

Russia’s largest lender Sberbank (SBER.MM) It offers to pay 4% on deposits up to $1,000, while the largest private bank Alfa Bank is offering 8% on dollar deposits for a period of three months. For ruble deposits, Sberbank offers an annual return of 20%.

Sberbank said on Wednesday it had pulled out of almost all European markets, blaming large cash outflows and threats to its employees and property, after the European Central Bank ordered the shutdown of its European arm. Read more

Moscow describes its actions in Ukraine as a “special operation” that it says is designed not to occupy territory but to destroy its southern neighbor’s military capabilities and arrest what it considers dangerous nationalists.

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Reporting by Reuters. Editing by Andrew Heavens, Edmund Blair and Jane Merriman

Our criteria: Thomson Reuters Trust Principles.