The Russian ruble drops to a new low in Moscow, and remains weaker abroad

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

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

The ruble was 7.3% weaker today at 108.60 against the dollar as of 0941 GMT in Moscow trade, earlier hitting 110.0, the lowest level ever. It has lost about a third of its value against the dollar since the beginning of the year.

It fell 7.1% on Wednesday to trade at 120.50 per euro.

For the third day in a row, the ruble was weaker outside Russia, trading at 115 against the dollar on electronic trading platform EBS, but still far from the 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.

JP Morgan said a deep recession was in the making for Russia and it 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.

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.

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 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

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

Reporting by Reuters. Editing by Andrew Heavens and Edmund Blair

Our criteria: Thomson Reuters Trust Principles.