Feb 28 (Reuters) – Russia’s rouble plummeted against the dollar on Monday to lead losses among developing world currencies after a clutch of Western nations imposed biting new sanctions on Russia for its invasion of Ukraine.
The rouble RUB= slid 30% earlier in the day to hit a record low of 109 per dollar and was trading 16% weaker at 1030 GMT, slammed by the sanctions, including some aimed at restricting the use of currency reserves of Russia’s central bank and blocking some banks from the SWIFT global payments system.
“(The move) torpedoes the ‘Fortress Russia’ strategy that has been adopted and implemented over the past decade, even before the annexation of Crimea,” said Marc Ostwald, chief economist and global strategist at ADM Investor Services International.
The Central Bank of Russia’s (CBR) efforts to restrict the rouble’s fall, including raising its key policy rate to 20% and ordering companies to sell 80% of their foreign currency revenues, had limited effect. Read full story
“It could be carnage for the rouble… no matter what the interest rate, it won’t compensate you for the potential capital loss relative to getting hold of the dollar,” said Gabriel Sterne, head of strategy services and global EM research at Oxford Economics.
The MSCI emerging market currency index .MIEM00000CUS lost 0.6%, while its stocks counterpart .MSCIEF slipped 0.2%. USD/
Most emerging market currencies in central and eastern Europe slipped against the euro, with Hungary’s forint EURHUF=, Poland’s zloty EURPLN= and the Czech crown EURCZK= down between 1% and 1.2%.
“There will be a lot of concern in European emerging markets, and others close to the crisis, both through trading and geopolitical links… but in our experience of conflicts, asset markets settle down rather quickly,” Sterne added.
The escalating Russia-Ukraine military crisis has spurred investors to shift money away from riskier emerging markets and into safer avenues such as the U.S. dollar USD= and gold XAU=.
Russian authorities also ordered brokers to stop executing orders by foreign legal entities and individuals to sell Russian securities, which analysts say could temper the exodus of foreign money. Read full story
While the CBR said it would not open trading sessions on the stock and derivatives markets on Monday, Sberbank’s London listing SBNCYQ.L sank 62%, while gas giant Gazprom’s GAZPQ.L tumbled 52%.
In other emerging markets, Mexico’s peso MXN= fell 1.0%, and South Africa’s rand ZAR= fell 2.1%, hurt by risk-off appetite towards emerging market assets, while oil prices soared on supply fears. O/R
For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh
For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX
For TOP NEWS across emerging markets Read full story
(Reporting by Anisha Sircar and Aaron Saldanha in Bengaluru; Editing by Jacqueline Wong and Krishna Chandra Eluri)
