This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine
MOSCOW, Dec 27 (Reuters) – The rouble dived around 3% against the dollar on Tuesday, failing to consolidate a recovery from last week’s slide as the market comes to terms with the prospect of lower export revenue in the wake of restrictions on Russian oil.
The rouble lost about 8% against the dollar last week and is on course for a hefty monthly decline after an oil embargo and price cap came into force. The finance ministry has said the recent slump was related to recovering imports.
By 1519 GMT the rouble was 3% weaker against the dollar at 71.36 , heading back towards the almost eight-month low of 72.6325 struck last week.
“At the end of December, the rouble is likely to remain extremely volatile as the market will need to find a new equilibrium under changed trade flows and increased sanctions pressure,” BCS World of Investments said in a note.
“This week, the rouble is expected to fluctuate in the range of 68-71 (per dollar).”
Against the euro, the rouble lost 3.4% to 76.03 . Against the yuan, it was down 3.3% at 10.09 .
The rouble just about remains the world’s best-performing major currency against the dollar this year, supported by capital controls and reduced imports.
Now, with exports and revenues falling, a weaker rouble is more beneficial, First Deputy Prime Minister Andrei Belousov said on Tuesday.
“The strong rouble has played its role,” Belousov said. “In these conditions … it would be good to have a rouble rate of 70-80 per dollar.”
Brent crude oil , a global benchmark for Russia’s main export, was up 1% at $84.8 a barrel while Russian stock indexes were mixed.
The dollar-denominated RTS index (.IRTS) was down 2.9% at 948.8 points. The rouble-based MOEX Russian index (.IMOEX) was 0.5% higher at 2,148.8 points after earlier touching its highest in nearly two weeks.
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Reporting by Alexander Marrow;
Editing by David Goodman and Emelia Sithole-Matarise
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This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine
MOSCOW, Dec 22 (Reuters) – The rouble recovered on Thursday after hitting its weakest mark since late April as the prospect of a favourable month-end tax period mitigated concerns over the impact of sanctions on Russian oil and gas.
By 1343 GMT, the rouble was up 0.4% against the dollar at 70.68 after earlier hitting 72.6325, its weakest since April 28, which had taken monthly losses to more than 15%.
It also pared losses to gain 0.5% to trade at 75.18 versus the euro , having earlier slid past the 77 mark for the first time since late April, and recovered to gain 0.4% against the yuan to 10.04 , up from a near seven-month low.
Should the rouble consolidate above the psychologically important levels of 70 per dollar, 75 to the euro and 10 per yuan, it could open up new downside horizons for the Russian currency, Veles Capital analysts said.
Falling export revenues in recent months have been exacerbated by a European Union oil embargo that began in December, when an oil price cap also took effect.
Brent crude oil , a global benchmark for Russia’s main export, was up 0.6% at $82.7 a barrel.
Analysts expect the rouble to find a foothold next week when month-end taxes, which usually see Russian exporters convert FX revenues to pay local liabilities, are due.
Russia has been borrowing heavily in the final quarter of the year, on Wednesday selling 337.8 billion roubles ($4.81 billion) of OFZ treasury bonds.
Russian banks have bought the vast majority of government debt, with sanctions preventing access for foreign investors, who had traditionally been attracted by Russia’s high yields.
Dominant lender Sberbank (SBER.MM) plans to build its liquidity buffer using bonds with floating-rate coupons, Anatoly Popov, deputy chairman of Sberbank’s executive board, told the RIA news agency. The bank holds more than 3 trillion roubles in OFZ bonds.
Russian stock indexes were higher.
The dollar-denominated RTS index (.IRTS) was up 0.8% at 947.6 points, recovering from its lowest mark since Oct. 10. The rouble-based MOEX Russian index (.IMOEX) was 0.5% higher at 2,125.9 points.
($1 = 70.2750 roubles)
Reporting by Alexander Marrow; Editing by Tom Hogue, Toby Chopra and Barbara Lewis
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A picture illustration shows Russian rouble banknotes of various denominations on a table in Warsaw, Poland, January 22, 2016. REUTERS/Kacper Pempel
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This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine
MOSCOW, June 29 (Reuters) – The rouble pared gains in volatile trade on Wednesday as Russia’s finance minister flagged possible interventions to ease upside pressure on the currency after it neared 50 against the dollar for the first time since May 2015.
The rouble has become the world’s best-performing currency this year, boosted by measures – including restrictions on Russian households withdrawing foreign currency savings – taken to shield Russia’s financial system from Western sanctions imposed after Moscow sent troops into Ukraine on Feb. 24.
The strong rouble raised concerns among officials and export-focused companies as it dents Russia’s income from selling commodities and other goods abroad for dollars and euros.
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Many Russian companies, primarily non oil-and-gas exporters, are already suffering financially, said Evgeny Suvorov, an economist at CentroCreditBank.
Finance Minister Anton Siluanov said Russia could cut state spending and channel funds for foreign currency interventions to keep a lid on the rouble’s strengthening which threatens budget revenue. read more
The rouble pared gains after the comment and was 0.4% weaker on the day at 52.00 to the greenback at 1154 GMT after hitting 50.01.
Proceeds from commodity exports, a sharp drop in imports, and month-end tax payments in roubles by export-oriented Russian firms are further factors behind the currency’s gains.
“The rouble (is) set to retreat over the coming days… With the month’s main tax payments now in the rearview mirror, hard currency purchasers may begin to step in,” Sberbank CIB said in a note.
The rouble is up nearly 44% year-to-date on the Moscow Exchange but remains much weaker at banks. VTB (VTBR.MM), Russia’s No.2 bank, offered to sell cash dollars and euros at 63.45 and 67.85, respectively.
Deputy Prime Minister Andrei Belousov said this month that industry would be more comfortable if it fell between 70 to 80 against the dollar.
Against the euro, the rouble was 0.6% stronger at 54.20, having earlier climbed beyond 53 for the first time since April 2015 .
Capital controls have enabled the currency to shrug off what the White House and Moody’s credit agency said on Monday was the first default by Russia in more than a century on its international bonds. read more
The Kremlin, which has hard currency from oil and gas revenue to make the scheduled payments on the debt, has rejected the designation, calling it artificial and engineered by Western sanctions.
Just before Russia embarked on what it calls its “special military operation” in Ukraine, the rouble traded near 80 to the dollar and 90 against the euro. At that time it traded in free-float mode and, unsupported by capital controls, got hammered due to fears of sanctions.
On the stock market, the dollar-denominated RTS index (.IRTS) fell 1.1% to 1,449.1 points. The rouble-based MOEX Russian index (.IMOEX) was 1% lower at 2,384.5 points.
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Reporting by Reuters; editing by John Stonestreet, Angus MacSwan and Emelia Sithole-Matarise
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A view shows Russian rouble coins in this illustration picture taken March 25, 2021. REUTERS/Maxim Shemetov/Illustration/File Photo
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April 11 (Reuters) – The rouble weakened sharply on Monday, reversing some of the previous week’s gains, after Russia relaxed temporary capital control measures aimed at limiting a drop in the currency.
Shares in Rosbank (ROSB.MM), a Russian subsidiary of French bank Societe Generale, jumped 40% after SocGen said it would quit Russia and take a 3 billion euros ($3.3 billion) income hit from selling Rosbank to Interros Capital, a firm linked to Russian oligarch Vladimir Potanin. read more
By 1500 GMT, the rouble had lost more than 4% of its value in jittery trade, sliding to 79.45 to the dollar , and was down 4.5% to 86.45 against the euro .
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During the trading session on Moscow Exchange, the rouble fell to 82.0950 against the dollar, from the 71 roubles hit on Friday which was its strongest since Nov. 11. read more
Late on Friday the central bank said it would scrap a 12% commission for buying foreign currency through brokerages from April 11 and lift a temporary ban on selling foreign exchange cash to individuals from April 18. read more
“The central bank gave markets a unequivocal signal that a further rouble strengthening was undesirable,” said Vladimir Evstifeev, an analyst at Zenit Bank.
The decision to scrap the 12% commission on FX operations means speculators will be able to trade again, Alor Brokerage said, adding market players were tending to lock in even small profits.
The rouble retains support from the obligatory conversion of 80% of FX revenues by export-focused companies as well as from high interest rates, even though the central bank unexpectedly cut its key rate from 20% to 17% last week. read more
ITI Capital analysts said Russia receives about $1.4 billion a day in export revenues and the rouble could firm further, given Russian capital controls and shrinking imports.
The central bank’s cut supported Russian OFZ government bonds. The finance ministry said at the weekend that it wouldn’t borrow on local or foreign debt markets this year.
Finance Minister Anton Siluanov also said Russia would take legal action if the West tried to force it to default on its sovereign debt. read more
Yields on 10-year OFZs, which move inversely with their prices, fell to 10.45% on Monday . That was their lowest since Feb. 21, three days before Russia started what it calls “a special military operation” in Ukraine, triggering unprecedented Western sanctions against Russia.
On the stock market, the dollar-denominated RTS index (.IRTS) fell 5.8% to 1,017.4 points and the rouble-based MOEX Russian index (.IMOEX) shed 1% to 2,566.6 points, with losses limited by the rouble’s slide.
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Editing by David Goodman and Mark Potter
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FILE PHOTO: A view shows a Russian rouble coin and a U.S. dollar banknote in this picture illustration taken October 26, 2018. REUTERS/Maxim Shemetov/File Photo
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NEW YORK/WASHINGTON, April 5 (Reuters) – The United States stopped the Russian government on Monday from paying holders of its sovereign debt more than $600 million from reserves held at U.S. banks, in a move meant to ratchet up pressure on Moscow and eat into its holdings of dollars.
Under sanctions put in place after Russia invaded Ukraine on Feb. 24, foreign currency reserves held by the Russian central bank at U.S. financial institutions were frozen.
But the Treasury Department had been allowing the Russian government to use those funds to make coupon payments on dollar-denominated sovereign debt on a case-by-case basis.
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On Monday, as the largest of the payments came due, including a $552.4 million principal payment on a maturing bond, the U.S. government decided to cut off Moscow’s access to the frozen funds, according to a U.S. Treasury spokesperson.
An $84 million coupon payment was also due on Monday on a 2042 sovereign dollar bond .
The move was meant to force Moscow to make the difficult decision of whether it would use dollars that it has access to for payments on its debt or for other purposes, including supporting its war effort, the spokesperson said.
Russia faces a historic default if it chooses to not do so.
“Russia must choose between draining remaining valuable dollar reserves or new revenue coming in, or default,” the spokesperson said.
JPMorgan Chase & Co (JPM.N), which had been processing payments as a correspondent bank so far, was stopped by the Treasury, a source familiar with the matter said.
The correspondent bank processes the coupon payments from Russia, sending them to the payment agent to distribute to overseas bondholders.
The country has a 30-day grace period to make the payment, the source said.
DEFAULT WORRIES
Russia does have the wherewithal to pay from reserves, since sanctions have frozen roughly half of some $640 billion in Russia’s gold and foreign currency reserves.
But a drawdown would add pressure just as the United States and Europe are planning new sanctions this week to punish Moscow over civilian killings in Ukraine. read more
Russia calls its actions in Ukraine a “special military operation”. Ukraine and the West say the invasion was illegal and unjustified. Images of a mass grave and the bound bodies of people shot at close range drew an international outcry on Monday. read more
Russia, which has a total of 15 international bonds outstanding with a face value of around $40 billion, has managed to avoid defaulting on its international debt despite unprecedented Western sanctions. But the task is getting harder. read more
“What they’re basically tying to do is force their hand and put even more pressure on (to deplete) foreign-currency reserves back home,” said David Wolber, a sanctions lawyer at Gibson Dunn in Hong Kong.
“If they have to do that, obviously that takes away from Russia’s ability to use those dollars for other activities, in essence to fund the war.”
It may also put pressure on Russian demands to be paid roubles for gas by European customers, he added.
Russia was last allowed to make a $447 million coupon payment on a 2030 sovereign dollar bond, due last Thursday, which was at least the fifth such payment since the war began.
If Russia fails to make any of its upcoming bond payments within their pre-defined timeframes, or pays in roubles where dollars, euros or another currency is specified, it will constitute a default. read more
While Russia is not able to access international borrowing markets due to sanctions, a default would prohibit it from accessing those markets until creditors are fully repaid and any legal cases stemming from the default are settled. read more
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Reporting by Megan Davies and Alexandra Alper. Additional reporting by Tom Westbrook; editing by Himani Sarkar and Jason Neely
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Valves are pictured at the Atamanskaya compressor station, part of Gazprom’s Power Of Siberia project outside the far eastern town of Svobodny, in Amur region, Russia November 29, 2019. REUTERS/Maxim Shemetov.
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Russia to decide on gas payment mechanism by Thursday
EU countries still at odds on how to pay in roubles
G7 nations refuse to pay for Russian gas in roubles
March 28 (Reuters) – Russia said on Monday it will not supply gas to Europe for free as it works out methods for accepting payments for its gas exports in roubles but G7 nations refused the demand.
At a meeting of European Union leaders on Friday, no common position emerged on Russia’s demand last week that “unfriendly” countries must pay in roubles, not euros, for its gas in the wake of the United States and European allies teaming up on a series of sanctions aimed at Russia. read more
Concerns over security of supply were enhanced after the demand, with companies and EU nations scrambling to understand the ramifications.
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The Russian central bank, the government and Gazprom (GAZP.MM), which accounts for 40% of European gas imports, should present their proposals for rouble gas payments to President Vladimir Putin by March 31.
“We are not going to supply gas for free, this is clear,” Kremlin spokesman Dmitry Peskov told a conference call. “In our situation, this is hardly possible and appropriate to engage in charity (with European customers).”
In a interview aired later on Monday with the American public broadcaster PBS, when asked whether gas would be turned off for non-payers, Peskov replied: “No payment – no gas.”
But he added that Russia is yet to take a final decision on how to respond should European countries refuse to pay in the Russian currency.
Meanwhile, energy ministers from the Group of Seven industrialized nations rejected the rouble payment demands, Germany economy and climate protection minister Robert Habeck said after talks with his counterparts. read more
“All G7 ministers have agreed that this is a unilateral and clear breach of existing contracts,” he told reporters after a virtual conference with G7 energy ministers.
The ministers “underlined once again that the concluded contracts are valid and the companies should and must respect them … payment in roubles is unacceptable, and we call on the companies concerned not to comply with Putin’s demand,” he said.
ENERGY SECURITY
Dutch and British wholesale gas prices rose by up to 20% on Monday on concerns about Russian gas supply.
The EU aims to cut its dependency on Russian gas by two-thirds this year and end Russian fossil fuel imports by 2027. Russian gas exports to the EU were around 155 billion cubic metres (bcm) last year.
On Friday, the United States said it will work to supply 15 bcm of liquefied natural gas (LNG) to the European Union this year. read more
U.S. LNG plants are producing at full capacity and analysts say most of any additional U.S. gas sent to Europe would have to come from exports that would have gone elsewhere.
Russian lawmaker Ivan Abramov said a refusal by the G7 to pay for Russian gas in roubles would lead to an unequivocal halt in supplies, according to the RIA news agency.
Abramov sits on the economic policy committee of the Federation Council, the Russian parliament’s upper chamber.
Germany’s Habeck called Russia “an unreliable energy supplier.”
When asked about what happens if Russia stops gas deliveries, he added: “we are prepared for all scenarios and not only since yesterday.”
However, the EU would struggle to replace all Russian gas exports in a short period of time, experts said. read more
Russian gas deliveries to Europe on three main pipeline routes were stable on Monday, with the Yamal-Europe pipeline continuing to flow eastwards from Germany into Poland, operator data showed. read more
Russia’s Gazprom (GAZP.MM) said it that it was continuing to supply natural gas to Europe via Ukraine in line with requests from European consumers.
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Reporting by Reuters; writing by Nina Chestney;
Editing by David Evans and Stephen Coates
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Energy stocks see double-digit gains on Moscow reopening
Sanctioned lender VTB, Aeroflot suffer falls
Rouble strengthens vs dollar, euro after Putin statement
OFZ benchmark 10-year yield nudges lower to 13.64%
Moscow Exchange to restart trading more instruments
March 24 (Reuters) – Energy and metals firms led a jump in Russian stocks on Thursday as trading resumed after almost a month’s suspension, reflecting soaring global prices for oil, gas and other commodities on fears the Ukraine crisis will threaten supply.
The market was also underpinned by a government commitment to support stocks, leading a senior U.S. official to dismiss the limited resumption of trading as a “a charade: a Potemkin market opening”.
Stocks had not traded on Moscow’s bourse since Feb. 25, the day after President Vladimir Putin sent troops into neighbouring Ukraine, prompting Western sanctions aimed at isolating Russia economically and then Russian countermeasures.
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The reaction has cut off Russian financial markets from global networks and sent the rouble currency tumbling. Stocks had also plunged immediately after Moscow launched what it calls “a special military operation” to disarm and “denazify” its southern neighbour.
Restrictions on trade with foreigners and a ban on short selling remained in place on Thursday as the Moscow Exchange cautiously resumed equities trading. On Friday, more securities, including corporate bonds and Eurobonds will be traded, the central bank said.
“We will do everything possible to open all segments of the stock market soon,” Boris Blokhin, head of Moscow Exchange’s stock market department, said.
STELLAR GAINS
The short session saw energy firms make stellar gains, with gas producer Novatek (NVTK.MM), oil majors Rosneft and Lukoil (LKOH.MM) and gas giant Gazprom (GAZP.MM) up 12%-18.5%.
Brent crude oil , a global benchmark for Russia’s main export, was trading near $120.6 per barrel on Thursday, having jumped more than 20% from a month ago as worries about supply disruptions from the Ukraine crisis drive up prices.
Shares in mining giant Nornickel also gained 10.2% (GMKN.MM).
Novatek and Nornickel pared losses sustained since before Feb. 24 by the session’s close. Fertiliser producer Phosagro (PHOR.MM) closed at a record high.
Reuters Graphics
“Large bids to buy Russian shares have been seen since the market opening,” BCS Brokerage said in a note, adding that a promise Russia’s rainy-day fund will buy shares was also underpinning the market.
“The overall sentiment is supported by the confidence that the finance ministry will buy stocks,” BCS said.
The government said on March 1 that it would use up to 1 trillion roubles ($10.4 billion) from the National Wealth Fund to buy battered Russian stocks, although it was not clear whether any purchases were being made on Thursday.
The finance ministry did not immediately respond to a request for comment.
‘POTEMKIN MARKET OPENING’
An interior view shows the headquarters of Moscow Exchange in Moscow, Russia April 27, 2021. REUTERS/Maxim Shemetov
A senior U.S. official said Moscow’s commitment to buy amounted to artificially propping up shares, and called the limited resumption “a Potemkin market opening”.
“This is not a real market and not a sustainable model – which only underscores Russia’s isolation from the global financial system,” deputy White House national security adviser Daleep Singh said in a statement.
Trading in Russian companies listed on the London Stock Exchange remains suspended. Prices of some instruments had plunged to almost zero before the bourse halted trading of them in early March.
The Moscow Exchange said 567,000 private investors had accounted for 58.2% of Thursday’s trading volume, with 121 professional participants conducting the remainder.
“Today the first step was made in our new reality,” said Elbek Dalimov, head of equity trading at Aton brokerage, adding that trading orders were limited with non-residents, who hold more than half the free float on the market, sidelined.
“In the morning we saw a huge number of retail investors who on the one hand were closing short positions and on the other were ready to park their roubles in shares, so as to somehow save them from inflation,” he said.
The benchmark MOEX stock index ended the short trading session 4.4% higher at 2,578.51 points, having earlier reached a day peak of 2,761.17 (.IMOEX).
The dollar-denominated RTS index (.IRTS) fell 9% on the day to 852.64, pressured by the weaker rouble, according to MOEX data that was suspended in the Eikon terminal.
The negative impact of sanctions was clear in some sectors, with shares in Russia’s second-largest lender VTB (VTBR.MM) down 5.5%. And with most European airspace closed to Russian planes, flagship carrier Aeroflot (AFLT.MM) sank 16.44%.
Trading apps of major brokerages with leading banks, including Sberbank, VTB and Alfa, reported temporary problems with processing clients’ orders following the restart.
ROUBLE FIRMS
The rouble meanwhile extended its recovery, gaining 1.3% to trade at 96.50 against the dollar in Moscow trade by 1502 GMT.
The currency had hit its strongest level in three weeks at 94.975 on Wednesday after Putin said Russia would start selling its gas to “unfriendly” countries in roubles. read more
Against the euro, the rouble was 2.1% higher at 105.75 , pulling further away from an all-time low of 132.4 it hit in Moscow trading earlier in March, but far from levels of around 90 seen before Feb. 24.
Russia resumed trading of OFZ treasury bonds on Monday with the central bank helping to stabilise the market with interventions, the amount of which it has not yet disclosed.
Yields of benchmark 10-year OFZ bonds, which move inversely to their prices, stood at 13.68% after hitting an all-time high of 19.74% on Monday .
($1 = 96.0000 roubles)
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A child holds the national flags of Russia and China prior to a welcoming ceremony for Russian President Vladimir Putin outside the Great Hall of the People in Beijing, China, June 25, 2016. REUTERS/Kim Kyung-Hoon
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LONDON, March 13 (Reuters) – Russia said on Sunday that it was counting on China to help it withstand the blow to its economy from Western sanctions over the war in Ukraine, but the United States warned Beijing not to provide that lifeline.
Russian Finance Minister Anton Siluanov said sanctions had deprived Moscow of access to $300 billion of its $640 billion in gold and foreign exchange reserves, and added that there was pressure on Beijing to shut off more.
“We have part of our gold and foreign exchange reserves in the Chinese currency, in yuan. And we see what pressure is being exerted by Western countries on China in order to limit mutual trade with China. Of course, there is pressure to limit access to those reserves,” he said.
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“But I think that our partnership with China will still allow us to maintain the cooperation that we have achieved, and not only maintain, but also increase it in an environment where Western markets are closing.”
Western countries have imposed unprecedented sanctions on Russia’s corporate and financial system since it invaded Ukraine on Feb. 24 in what it calls a special military operation.
Siluanov’s comments in a TV interview marked the clearest statement yet from Moscow that it will seek help from China to cushion the impact.
But U.S. National Security Adviser Jake Sullivan said Washington was warning China not to provide it.
“We are communicating directly, privately to Beijing, that there will absolutely be consequences for large-scale sanctions, evasion efforts or support to Russia to backfill them,” Sullivan told CNN.
“We will not allow that to go forward and allow there to be a lifeline to Russia from these economic sanctions from any country, anywhere in the world,” added Sullivan, who is due to meet China’s top diplomat Yang Jiechi in Rome on Monday. read more
Russia and China have tightened cooperation in recent times as both have come under strong Western pressure over human rights and a raft of other issues. Beijing has not condemned Russia’s attack on Ukraine and does not call it an invasion, but it has urged a negotiated solution.
Presidents Vladimir Putin and Xi Jinping met in Beijing on Feb. 4 and announced a strategic partnership they said was aimed at countering the influence of the United States, describing it as a friendship with no limits.
China is Russia’s top export market after the European Union. Russian exports to China were worth $79.3 billion in 2021, with oil and gas accounting for 56% of that, according to China’s customs agency.
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Reporting by Mark Trevelyan; Editing by Hugh Lawson
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Russian Rouble coins are seen in front of displayed U.S. Dollar banknote in this illustration taken, February 24, 2022. REUTERS/Dado Ruvic/Illustration/Files
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NEW YORK, March 2 (Reuters) – The rouble touched a record low of 110 to the dollar in Moscow on Wednesday and crawled back near 100 in other trading platforms, though it continued under pressure as Russia’s financial system teetered under the weight of Western sanctions imposed over the invasion of Ukraine.
The Russian stock market remained closed and trading on bonds showed wide bid-ask spreads and little-to-no volume.
The rouble fell 4.5% to 106.02 against the dollar in Moscow trade , earlier hitting 110.0, a record low. It has lost 30% of its value against the dollar since the start of the year. Against the euro , it shed 2.5% on Wednesday to finish the day at 115.40.
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But trading outside of Russia , saw the currency rebound to end the day up 6% to 100 on the EBS platform and 7.6% at 97.6 elsewhere.
The currency is still over 20% weaker than where it traded at during the first half of February.
On the EBS platform, the rouble has this week had the three widest daily ranges since 2010, with Monday the widest range on record.
“Who gosh-darn knows what’s going to happen tomorrow,” said Colin Stewart, head of Americas at Quant Insight in New York.
“It’s just too volatile.”
Russia has responded to the currency weakness by more than doubling its benchmark interest rate to 20% and telling companies to convert 80% of their foreign currency revenues on the domestic market as the central bank, which is now under Western sanctions, has stopped foreign exchange interventions.
The weak rouble will hit living standards in Russia and fan 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 exit Russia, while the country’s credit ratings are coming under pressure as a result of 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 from the additional and more severe sanctions being imposed.”
JPMorgan said about $4.2 billion in Russian debt is at risk of being kicked out of investment-grade bond indexes.
Meanwhile, Scope Ratings said capital controls “raise significant questions surrounding the Russian state’s willingness to service its debt owed to foreign residents” a day after cutting its Russia rating to junk status.
The measures, Scope added, make Russia “more vulnerable to banking and liquidity crises.”
In a separate note, JPMorgan said there was a deep recession in the making for Russia and the bank was reassessing its regional macro forecasts.
“The most recent measures targeting the CBR have completely changed the picture,” JPMorgan said.
“Russia’s large current account surplus could have accommodated large capital outflows, but with accompanying CBR and SWIFT sanctions, on top of the existing restrictions, it is likely that Russia’s export earnings will be disrupted, and capital outflows will likely be immediate.”
Several Russian banks have been barred from the SWIFT global financial network that facilitates transfers between banks.
As households and businesses in Russia have rushed to convert the falling rouble into foreign currency, banks raised rates for foreign currency deposits to attract those flows.
Russia’s largest lender Sberbank (SBER.MM) is offering to pay 4% on deposits of up to $1,000, while the largest private lender Alfa Bank is offering 8% on three-month dollar deposits. For rouble deposits, Sberbank offers a 20% annual return.
Sberbank said on Wednesday it was quitting almost all European markets, blaming big cash outflows and threats to its staff and property, after the ECB ordered the closure of its European arm. 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 heavily exposed to Russia fell 13% on Wednesday, for a 72% drop since mid-February.
Moscow calls its actions in Ukraine a “special operation” that it says is not designed to occupy territory but to destroy its neighbour’s military capabilities and capture what it regards as dangerous nationalists.
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Reporting by Reuters; Editing by Jane Merriman, Jonathan Oatis and Grant McCool
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MOSCOW, Feb 21 (Reuters) – The rouble tanked on Monday, slipping past 80 against the dollar, while stocks plunged to their lowest in over a year as Russian President Vladimir Putin called for the immediate recognition of two breakaway regions in eastern Ukraine.
Putin signed a decree recognising the breakaway regions in eastern Ukraine as independent entities, upping the ante in a regional crisis the West fears could erupt into war. read more
The rouble fell to as low as 80.0650 against the dollar during Putin’s lengthy televised address to the Russian nation but pared some losses as Putin announced his decision, which he said would find support among Russian people.
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The sharp drop in the rouble from levels around 70 to the greenback seen just four months ago is expected to fuel already high inflation, one of the main concerns among Russians, which would dent the country’s already falling living standards.
By 1956 GMT, the rouble fell 2.7% to 79.37 against the dollar . It had been as strong as 76.1450 earlier in the session.
Against the euro, the rouble had lost 2.6% to 89.79 after hitting 90.7850, a level last seen in April 2021.
No Russian assets were left unscathed, with stocks cascading to their lowest since early November 2020 and bond yields, which move inversely to prices, soaring to their highest since January 2016.
The dollar-denominated RTS index (.IRTS) finished the day 13.2% lower at 1,207.5 points and the rouble-based MOEX Russian index (.IMOEX) lost 10.5% to 3,036.9 points.
Yields on Russia’s 10-year benchmark OFZ bonds hit a high of 10.64%. The cost of insuring Russia sovereign debt against default also surged to its highest since early 2016 and both Moscow and Kyiv’s sovereign dollar bonds tumbled.
Goldman Sachs analysts said it now seemed plausible that geopolitical risks in the Ukraine-Russia standoff were starting to have a meaningful impact on global assets.
Comparing the rouble with its high-yielding emerging market peers was a good measure of the amount of risk premium still priced into the rouble, they said.
“On that basis, our latest estimates would put the risk premium from recent escalation at 9% based on Friday’s closing prices,” Goldman Sachs said.
DIPLOMACY VS. SANCTIONS
The prospect of a possible summit between Putin and U.S. President Joe Biden, as well as upcoming talks between the United States and Russia’s top diplomats on Feb. 24, had given investors a glimmer of hope earlier in the session.
Despite Moscow’s repeated denials of Western statements saying that it plans to invade neighbouring Ukraine, Russian assets have been hammered by fears of a military conflict that would almost certainly trigger sweeping new Western sanctions against Moscow.
Washington has prepared an initial package of sanctions against Russia that includes barring U.S. financial institutions from processing transactions for major Russian banks, three people familiar with the matter told Reuters. read more
Shares of Russia’s top banks Sberbank (SBER.MM) and VTB (VTBR.MM) fell 20% and 17% respectively, underperforming the wider market.
Oil major Rosneft’s (ROSN.MM) shares also dropped 13.3%.
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Reporting by Alexander Marrow and Andrey Ostroukh; Editing by Stephen Coates, Bernadette Baum, Tomasz Janowski, Andrew Heavens and Aurora Ellis
Our Standards: The Thomson Reuters Trust Principles.
