Tough economic sanction has hit Russia hard as the `ruble’ drops by 41 percent against the dollar.
The ruble dropped to 117 per US dollar. The ruble sank to a record low and stocks had their biggest-ever retreat, forcing a second trading halt by the Moscow Exchange. Bank of Russia said it will intervene in the foreign exchange market for the first time in years and take measures to tame volatility in financial markets.
Russian central bank made no mention of raising interest rates but said it will provide additional liquidity to banks by offering 1 trillion rubles ($11.5 billion) in an overnight repo auction. Policymakers have increased the benchmark rate by 525 basis points in the past 12 months to tame inflation.
“Significant overshooting is possible, and the dollar-ruble at 100 certainly is well in range,” said Commerzbank AG strategist Ulrich Leuchtmann. “I don’t think that interventions will be the main instrument of choice. They can only prevent extreme overshooting. Rate hikes have to follow soon.”
United States, the European Union, the United Kingdom, Japan, Canada, and Australia have issued a slew of sanctions against Russia in response to international outrage over Russian President Vladimir Putin’s military offensive against Ukraine.
Some banks have been barred from using the international SWIFT payment system, the Russian central bank has been barred from utilizing its foreign exchange reserves, Russian official media broadcasts have been banned, and Russian flights have been restricted from flying over European territory.