Russia sharply increases rates as sanctions send rouble plunging

Russia’s central bank more than doubled interest rates on Monday in an attempt to stabilize the country’s financial markets, after unprecedented Western sanctions caused the ruble to plummet to 29%.

The central bank has raised its principal interest rate to 20% from 9.5% in an emergency decision to offset the risks of the rapid devaluation of the ruble to financial stability and protect the savings of Russians from deletion, according to RIA Novosti, the state-owned news agency.

The ruble fell to almost 118 against the US dollar in foreign trade on Monday, according to Bloomberg data, after a weekend in which Russian President Vladimir Putin Put his nuclear forces on high alert And the US and Europe have released theirs The most severe sanctions In order to disconnect the country from the global financial system.

The central bank also said it would announce later Monday whether stock trading would resume after the morning session was canceled. The country’s Moex index has fallen around 30% so far in February in local currency terms.

The market moves came when the Ukrainian army said on Monday that it had repelled another night of attacks on Kyiv, as columns of Russian soldiers repeatedly tried to storm the capital.

The Ukrainian military also said enemy troops continued to attack airports, air defense systems, critical infrastructure and residential areas across the country. The claims of the Russian and Ukrainian armies cannot be verified independently.

As an early sign of how Moscow is being pushed to the margins of global markets, Norway said On Sunday Its $ 1.3 billion oil fund, the largest sovereign wealth fund in the world, will freeze its investments in Russian assets and start selling from the country. Also BP, the British energy group said It will sell 20% of its shares in the state-owned Russian oil company Rosneft, which has owned it since 2013.

The ruble had already been hit hard the previous week, falling to a record low following the invasion and imposition of sanctions by the US and Europe.

The U.S. and its allies have stepped up these punitive measures on Saturday, targeting Russia’s central bank to prevent it from using international reserves. Western allies have also agreed to cut some of the country’s lenders from the Swift messaging system, a vital component of global payment infrastructure.

The Russians have created long queues for withdrawing money from cash machines, with the central bank lacking a clear mechanism for stabilizing its economy and currency.

The Russian central bank intervened to strengthen the ruble last week by selling foreign exchange reserves. But this weekend’s sanctions against the central bank are hurting the scope to maintain this support.

“Simply put, Russia’s ability to make transactions with any global financial institution will be severely hampered, as most international banks in every jurisdiction use Swift,” wrote Deutsche Bank analyst George Sarabloss in a comment to clients.

Serabloss added that it expects financial markets to reflect increasing risks to energy supply, undermining investors’ willingness to buy risky assets and possibly also dragging the euro down.

“Money markets may experience some deterioration in funding conditions this week amid the uncertain impact of asset freezes on global liquidity. The European Central Bank, the Fed and other central banks could have been expected to intervene to provide a strong restraint if necessary, and not rule out meetings between meetings,” he said. Adding that the ruble and other currencies of emerging markets in Europe were expected to come under pressure.

On Friday, the rating agency S&P Global Russia’s debt rating downgraded to “junk” Status, emphasizing the risk that the military attack on Ukraine could prove even deeper damage to the country’s financial markets.

Russia’s central bank sought to calm market nerves on Sunday, saying it would offer unlimited liquidity to banks. “The Russian banking system is stable, and has a sufficient capacity of capital and liquidity to function in any situation,” it read.

Russia sharply increases rates as sanctions send rouble plunging Source link Russia sharply increases rates as sanctions send rouble plunging

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