Beaten ruble curbs slide in Moscow, hits record high outside Russia

A vendor counts Russian ruble banknotes at a market in Omsk, Russia February 18, 2022. REUTERS/Alexey Malgavko

Feb 28 (Reuters) – The Russian ruble fell to a record low on Monday in extremely volatile trade, losing a third of its value so far this year, but an emergency rate hike and other urgent measures passed by the central bank helped it reduce its losses. .

The Bank of Russia had sold about $1 billion of its reserves on Thursday, February 24, the day Russia invaded Ukraine. But Governor Elvira Nabiullina said the central bank stopped its interventions on Monday due to the latest Western sanctions, suggesting the ruble was being supported by other unnamed market participants. Read more

On Monday, Russian financial authorities ordered domestic exporting companies to sell 80% of their foreign currency earnings from February 28.

Russian markets suffered after Western countries tightened sanctions in retaliation for the Russian invasion of Ukraine, the biggest attack on a European state since World War II. In response, President Vladimir Putin on Sunday ordered his military command to put nuclear forces on high alert. Read more

At the early close at 4:00 p.m. GMT, the ruble traded at 94.60 to the US dollar, down 14% from Friday’s close as the 20% hike in the central bank’s benchmark rate limited losses. in Moscow trade. Read more

It had previously hit a record low of 120 to the dollar on electronic currency trading platform EBS, and was still trading considerably higher there than in Moscow. Per euro, the ruble closed down 14% at 106.0 .

Russia’s hard-currency sovereign bonds have suffered a dramatic decline in recent days, although losses accelerated sharply on Monday, with many of the country’s dollar bonds falling more than 40 cents a day and issues at over long term trading at deeply distressed levels. from 29 to 33 cents, according to data from Tradeweb.

The cost of insuring exposure to Russian debt through credit default swaps soared to a record high of 1,200 basis points, around ten times the 124 basis point level at which it stood at the end of the year. December.

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.

“Rising rates to 20% can very significantly limit the possibility of opening positions against the rouble… But new shocks from the geopolitical sphere and sanctions can lead to unpredictable peaks in supply and demand that can upset the balance,” said Maxim Biryukov. , senior analyst at Alfa Capital.

Stock trading on the Moscow Stock Exchange was closed, but certificates of deposit and exchange-traded funds listed in London and Frankfurt were opened for trading with the London-listed iShares MSCI Russia ETF (CSRU. L) which fell 48%, year over year. 70% loss date.

Certificates of deposit at dominant state lender Sberbank in London fell more than 70% on the day and are down 93% year-to-date. Its European branch is threatened with failure, the European Central Bank (ECB) has warned, after a run on its deposits triggered by the backlash of Russia’s invasion of Ukraine. Read more

STATE SUPPORT VS SANCTIONS

Russia is extremely likely to default on its external debts and its economy will suffer a double-digit contraction this year after Western sanctions, the Institute of International Finance said on Monday. Read more

Russia’s central bank has rushed to manage the fallout from sanctions that will block some Russian banks from the SWIFT international payment system, with a series of measures on Sunday. Read more

The central bank said it would resume buying gold domestically, launch a no-limit buyout auction and ease restrictions on banks’ open currency positions.

Rabobank analysts had warned ahead of the opening of the Moscow Stock Exchange that sanctions on foreign exchange reserves were further removing what little support the ruble had.

“Even gold is illiquid if no one can use the FX in exchange. There will be a complete collapse of the ruble today,” they wrote.

Ray Attrill, head of FX strategy at National Australia Bank, said in a note on Sunday, “a collapse of the ruble looks inevitable on Monday morning,” and there was heightened risk of Russian debt default as a result. weekend developments.

Reuters reporting in Moscow; Additional reporting by Vidya Ranganathan in Singapore and Karin Strohecker in London; Editing by Shri Navaratnam, Catherine Evans, Hugh Lawson, William Maclean

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