Ruble Hits New Low in Moscow, Rebounds Out of Russia

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

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NEW YORK, March 2 (Reuters) – The ruble hit a new high of 110 to the dollar in Moscow on Wednesday and fell back below 100 in other trading venues, though it remained under pressure as the country’s financial system reeled under the weight of Western sanctions imposed following Moscow’s invasion of Ukraine.

The Russian stock market remained closed and bond trading showed wide bid-ask spreads and low volume.

The ruble fell 4.5% to 106.02 against the dollar in Moscow trade, earlier hitting 110.0, a record low. It has lost about a third of its value against the dollar since the start of the year. Against the euro, it lost 2.5% to end the day at 115.40.

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But trade out of Russia saw the currency gain almost 10% on the day towards 95 per dollar, still 20% lower than where it traded in the first half of February.

“Ruble volatility remains extremely high, which could be caused by unstable currency sales by exporters as well as further heightened stress levels among market participants and households in particular,” Raiffeisen said in a statement. note.

Russia responded to the weak currency by more than doubling interest rates to 20% and telling businesses to convert 80% of their earnings into foreign currency domestically because the central bank, or CBR, which is now under Western sanctions, halted exchange interventions.

The weak ruble will affect living standards in Russia and stoke already high inflation, while Western sanctions are expected to create shortages of essential goods and services such as cars or flights. Read more

Many international companies have announced plans to leave Russia as the country’s credit ratings come under pressure due to the crisis.

Credit rating agency Moody’s said it was reviewing Russia’s rating for a downgrade, a move that “reflects the negative credit implications for Russia’s credit profile of additional and tougher sanctions. imposed”.

Meanwhile, Scope Ratings said the capital controls “raise important questions about the Russian state’s willingness to repay its debt to foreign residents” after it downgraded its rating to junk status.

The measures, Scope added, make Russia “more vulnerable to banking and liquidity crises.”

JPMorgan said a deep recession was brewing for Russia and the bank was reassessing its regional macroeconomic forecast.

“The most recent actions targeting CBR are a complete game-changer,” JPMorgan said.

“Russia’s large current account surplus could have accommodated large capital outflows, but with accompanying CBR and SWIFT sanctions, in addition to existing restrictions, it is likely that Russia’s export earnings Russia will be disrupted and capital outflows will likely be immediate.”

Several Russian banks have been excluded from the SWIFT global financial network which facilitates transfers between banks.

As Russian households and businesses rushed to convert the falling ruble into foreign currency, banks raised foreign currency deposit rates to attract those flows.

Russia’s biggest lender, Sberbank (SBER.MM), offers to pay 4% on deposits up to $1,000, while the biggest private lender, Alfa Bank, offers 8% on three-dollar deposits. month. For deposits in rubles, Sberbank offers an annual return of 20%.

Sberbank said on Wednesday it was quitting almost all European markets, blaming large cash outflows and threats to its staff and property, after the ECB ordered the closure of its European branch. Read more

The bank’s London-traded shares fell to 4.5 cents from $16 at the start of the year.

A U.S.-traded ETF of Russian companies and others with high Russian exposure fell nearly 8% on Wednesday, down 70% since mid-February.

Moscow calls its actions in Ukraine a “special operation” which it says is not designed to occupy territory but to destroy the military capabilities of its southern neighbor and capture what it sees as dangerous nationalists.

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Reuters reporting; Editing by Andrew Heavens, Edmund Blair, Jane Merriman and Jonathan Oatis

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