4:51 AM GMT+7
March 9 (Reuters) -
Russia's rouble tumbled to record lows in onshore trading on Wednesday despite
measures by Moscow to shore up its battered economy and safeguard hard currency
availability amid fresh economic sanctions triggered by its invasion of
Ukraine.
Catching up after two
days of market closure, the rouble jumped to 120.83 to the dollar on the Moscow
Exchange before clawing back some losses to close at 120, or 12.5% softer than
its Friday close.
It closed 6.3% weaker
against the euro at 127 after hitting a record 131 per euro in early trade.
Offshore rouble
trading was also thin with large disparities in pricing: On Refinitiv, the
rouble stood at 129 to the dollar while on the EBS platform it was bid at 138
from the previous 130 close, down 5.8% .
Russia's financial
markets have been thrown into turmoil since its invasion of Ukraine prompted
severe economic sanctions.
On Wednesday, the
European Union froze ties with the central bank of Belarus, an ally of Russia
in its Ukrainian invasion, and top banks there. read more
"If we just take
a step back and think about the near term, the headlines about lack of
liquidity, how the military situation evolves, that will determine a lot of the
near-term trading," said Yung-Yu Ma, chief investment strategist at BMO
Wealth Management.
"But if we think
about the long term economics, a very weak rouble certainly makes sense for the
foreseeable future."
The central bank has
more than doubled its key interest rate to 20% and the government has rolled
out support measures, but Russian assets have been sold heavily and the rouble
is now down around 30% against the dollar in Moscow since Russia sent troops
into Ukraine on Feb. 24.
On Tuesday, the central
bank said it was offering additional crisis support to financial firms and that
banks were banned from selling foreign currency to its citizens for the next
six months, a move seen aimed at preserving precious hard currency in the
country. read more
The finance ministry
said Russian banks will be allowed to lend to companies controlled by
non-residents, which would allow companies wishing to do business in Russia to
operate as usual.
Trading in equities on
the Moscow Exchange remained closed. Stocks last traded in Moscow on Feb. 25.
BMO's Ma said that
once the stock market reopens there is a chance that prices will drop further
than what their longer-term value will be, but timing that will be very hard.
"It's certainly
not something for anyone who is unwilling to take an extreme amount of risk
because the reality is that many international investors simply want out and
price doesn't really matter," said Ma.
Russia's 5-year credit
default swaps - a measure of the cost of insuring exposure to the country -
soared sharply to a record 2,960 basis points and was recently at 2,939 bps .
Annual inflation in
Russia accelerated to 9.15% in February from 8.73% in January, its highest in
seven years, with prices soaring further on a weakening rouble. read more
Michael Metcalfe,
global head of macro strategy at State Street Global Markets, said in a
research note that there were signs prices in Russia had risen sharply since
the rouble's slump - more so than in prior currency collapses.
"If it were
sustained in the coming weeks and months, (this rate) could see the Russian
annual inflation rate almost double in the coming months," Metcalfe wrote.
Reporting
by Reuters; editing by William Maclean, Bernadette Baum and Jonathan Oatis
https://www.reuters.com/markets/deals/russian-rouble-weaker-early-moscow-trade-2022-03-09/
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