The ruble falls sharply, bonds and stocks prolong the fall

  • East-West tensions reduce appetite for Russian assets
  • The ruble extends its losses after falling more than 2% on Thursday
  • The currency plunges to nearly 77 against the dollar
  • The ruble falls to 88.14 against the euro, the weakest since July
  • OFZ 10-year government bonds fall to lowest since March 2016

MOSCOW, Jan 14 (Reuters) – The Russian ruble gave up earlier gains and fell sharply on Friday, extending its steepest decline in 15 months on fears of escalating geopolitical tensions between Moscow and the West, while that government bonds and equities suffered heavy losses.

Russian currency, bonds and stocks took a hit after Russia said Washington’s rejection of key security demands from Moscow was driving the talks to an impasse. Read more

As of 12:45 GMT, the ruble was down 0.6% on the day at 76.77 against the dollar after losing more than 2% of its value on Thursday. Read more

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Against the euro, the ruble lost 0.6% to settle at 87.84, a far cry from the 85.23 hit on Thursday.

Yields on Russia’s 10-year OFZ benchmark government bonds, which move inversely to their prices, reached 9.46% – a level last seen in March 2016.

“The reason for such a slump is unanimous selling by non-residents who reduced their exposure to Russia due to heightened geopolitical risks,” said Evgeny Suvorov, an economist at CentroCreditBank.

The market was also reacting to a television interview in which Deputy Foreign Minister Sergei Ryabkov neither confirmed nor ruled out the possibility that Russia could deploy “military infrastructure” in Cuba and Venezuela.

“The specter of a crisis in the Caribbean has weakened the rouble,” said Russian broker Alor Broker.

The ruble retains fundamental support thanks to a strong current account surplus and high interest rates at home, but Russia has been living under financial and economic sanctions since 2014 following the annexation of Crimea.

“We believe the Russian economy is better prepared to face sanctions than it has been since 2014,” Morgan Stanley said in a note, adding that exchange rates and investor confidence remain a risk. .

Russia-Ukraine risk gauges still well below 2014 levels

The ruble has been under pressure since October as Western countries expressed concerns over Russia’s military buildup near Ukraine. Moscow has said it can move its troops to its own territory if it deems it necessary.

Ukraine’s dollar-denominated sovereign bonds came under selling pressure on Friday, while its five-year credit default swaps, which measure the cost of insuring against a default, jumped 19 basis points (bps) at 798 bps and the highest level since the pandemic rout in March 2020.

The central bank declined to comment on a question from Reuters about the implications of the ruble’s decline, which raises the risks of higher inflation as it makes imports more expensive and lowers living standards.

Russian stock indices continued to fall after a short-lived rally.

“Overseas sales have picked up after the London opening… The market is driven solely by geopolitical pressure and talks between Russia and its Western partners,” said Karen Isadzhanyan, chief trader at Sinara. Investment Bank.

The dollar-denominated RTS index (.IRTS) fell 2.3% to 1,481.9 points, after hitting its lowest since April at 1,476.55 points. Russia’s ruble-based MOEX index (.IMOEX) fell 1.6% to 3,614.1 points.

Shares of biggest lender Sberbank (SBER.MM) underperformed the market and fell 4.4% to 260.6 rubles ($3.41), their lowest level since early 2021.

($1 = 76.2000 rubles)

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Reporting by Andrey Ostroukh and Alexander Marrow; additional reporting by Marc Jones and Karin Strohecker in London; Editing by Sherry Jacob-Phillips and David Goodman

Our standards: The Thomson Reuters Trust Principles.

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