Rouble Hovers Near 100 Vs Dollar In Moscow, Hits Record Low Outside Russia

Rouble Hovers Near 100 Vs Dollar In Moscow, Hits Record Low Outside Russia

(Reuters) -The Russian rouble tumbled to a record low in extremely volatile trade on Monday, losing a third of its value so far this year, but an emergency rate hike and other urgent measures adopted by the central bank helped it trim losses.

The Bank of Russia had sold around $1 billion from its reserves on Thursday, Feb. 24, the day Russia invaded Ukraine. But Governor Elvira Nabiullina said the central bank had stopped interventions on Monday due to the latest western sanctions, suggesting the rouble was supported by other unnamed market participants.

On Monday, the finance ministry and the central bank jointly said they plan to order domestic exporting companies to sell 80% of their foreign exchange revenues from Feb. 28.

Russian markets suffered after Western countries stepped up sanctions in retaliation for Russia’s invasion of Ukraine, the biggest assault on a European state since World War Two. In response, President Vladimir Putin ordered his military command to put nuclear-armed forces on high alert on Sunday.

By 1610 GMT the rouble was trading at 98.21 to the U.S. dollar, down 18.3% from Friday’s close, with central bank selling of foreign currency and its 20% key rate hike limiting its losses in Moscow trade.

It had earlier touched 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 rouble was 17.2% lower at 109.0.

Moscow calls its actions in Ukraine a “special operation” that it says is not designed to occupy territory but to destroy its southern neighbour’s military capabilities and capture what it regards as dangerous nationalists.

“The rate hike to 20% can very substantially limit the ability to open positions against the rouble… But new shocks from the geopolitical sphere and sanctions can lead to unpredictable spikes in supply and demand that can disrupt the balance,” said Maxim Biryukov, senior analyst at Alfa Capital.

Stocks trading on the Moscow Exchange was closed.

STATE SUPPORT VS SANCTIONS

Russia’s central bank announced a slew of measures on Sunday to support domestic markets as it scrambled to manage the fallout of the sanctions that will block some Russian banks from the SWIFT international payments system.

The central bank said it would resume buying gold on the domestic market, launch a repurchase auction with no limits and ease restrictions on banks’ open foreign currency positions.

Analysts at Rabobank had warned before the Moscow Exchange opened that the sanctions on currency reserves removed what little support the rouble had.

“Even the gold is not liquid if nobody can use FX in exchange for it. There will be a complete collapse in the rouble today,” they wrote.

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

(Reporting by Vidya Ranganathan; Additional reporting by Karin Strohecker in London; Editing by Shri Navaratnam, Catherine Evans and Hugh Lawson)