In response to the fall in the rouble, Russia’s central bank increased liquidity in the banking sector and began selling foreign currency on the forex market. The Russian military launched missiles at Ukrainian towns and deployed soldiers on the country’s shore after weeks of denying preparations to invade neighboring Ukraine.
As a result, the United States imposed a wide range of penalties on Russia’s financial sector, as well as its energy sector, if Moscow invaded its neighbor. Central bank intervention in the foreign exchange market for the first time since Russia acquired Crimea peninsula from Ukraine in 2014.
Even though the exact amount of foreign currency the central bank was selling was not immediately known, the rouble was able to recoup some of its earlier losses and move away from its all-time low of 89.60 per dollar and the crucial threshold of 100 per euro that it had been approaching in the early morning hours.
“Harsh sanctions are necessary because of the military activity in Ukraine,” Raiffeisenbank stated in a letter. “The central bank’s efforts halted the rouble meltdown, but its potential for additional deterioration remains considerable.”
According to Promsvyazbank experts, the regulator may have spent $1 billion to $2 billion supporting the rouble. December delivered $5 billion in foreign currency banknotes to the nation and enhanced liquidity coverage of foreign exchange assets as a precaution before sanctions were implemented. It is also worth mentioning that in the process of the Ukraine-Russia war the situation for the Forex traders has become worse. As a result, trading for beginners became much more difficult due to the new sanctions from the west and the way the FX market started to operate for Russian people. Investors in Russia started to seek new ways to start Forex trading, however, this became quite complicated because of the existing situation in the country.
Some Moscow residents had difficulty withdrawing dollars and euros, and one ATM in the city’s northeast stopped working after a Reuters witness withdrew 20,000 roubles, according to Russian media reports.
Government Guarantees Control
Despite Russian authorities’ claims that Moscow’s financial system is robust enough to endure both volatility and sanctions, European Commission leader Ursula von der Leyen warned that such restrictions would “weaken Russia’s economic basis and its potential to modernize”.
A record $643 billion in gold and foreign currency reserves and a debt-to-GDP ratio of less than 20 percent helped Russia achieve a $120.3 billion current account surplus last year.
In the face of sanctions and other external threats, the Russian government says it has financial resources sufficient to keep the financial system operating. The budget also has over 4.5 trillion roubles in additional money available.
It was determined that the financial industry and the top firms were “completely prepared to execute” the government’s intentions after stress tests were conducted to evaluate potential punishments. Insufficient information was provided.
All of our employees are encouraged to switch to cards utilizing this payment mechanism, as stated by a memo obtained exclusively by Reuters. The memo also said that Sberbank, VTB, and AlfaBank must open these cards by the end of today.
Impact Of Russia-Ukraine War On Rouble
Vladimir Putin’s invasion of Ukraine has sparked unprecedented international sanctions on Russia’s financial system, and as a result the rouble has plunged more than 40% since Monday.
President Volodymyr Zelenskiy said the next 24 hours would be “crucial” for Ukraine and a column of Russian tanks had been reported to be marching toward the city.
A historic low was set when the markets opened today, with the Russian rouble plunging 41.5 percent to an all-time low of 119 to the dollar, down from 83.7 at the closing on Friday. Later in the day, it gained a little ground and is now trading at 107 to the dollar, down 28% from its opening price.
Vladimir Putin’s central bank has increased interest rates by more than double to 20% and barred foreigners from selling local assets to defend Russia’s currency and economy.
Fresh signals of Vladimir Putin’s nuclear brinksmanship led to economic instability. Belarus declared that a vote on constitutional reforms that would abolish the country’s neutrality and nuclear-free status had received sufficient popular support. Russia might now put nuclear weapons on Belarusian land if the necessary amendments are made.
Before that, Putin had ordered his military to raise the alert level for their nuclear deterrent capabilities, a move the US called “absolutely unacceptable” and labeled by Nato Secretary General Jens Stoltenberg as “dangerous language.
European Central Bank (ECB) declared Sberbank Europe, a wholly-owned subsidiary of Sberbank Russia (which is controlled by the Russian state), was failing or about to collapse together with its Croatian and Slovenian divisions on Monday.
After the Russian rouble began to tumble, it was clear that this was going to be a tumultuous day on the global financial markets. Against all other currencies, the U.S. dollar strengthened, while Brent crude oil futures rose 4% to more than $102 per barrel. On the heels of the Ukraine crisis, Asian stock markets plummeted, while the German Dax was down 2.6 percent in early trade and the British FTSE 100 was down 1.5%.