Russia is sharply raising rates as sanctions send the ruble down

Russia’s central bank on Monday doubled interest rates in a bid to stabilize the country’s financial markets after Western sanctions sent the ruble down 29 percent.

According to RIA Novosti, the central bank raised its key interest rate from 9.5 percent to 20 percent, an urgent decision to offset the risks of rapid depreciation of the ruble for financial stability and to protect the savings of Russians from being destroyed. Owned news agency.

According to Bloomberg data, the ruble fell to almost 118 against the US dollar in foreign trade on Monday, according to Russian President Vladimir Putin over the weekend. Put its nuclear forces on high alert And the United States and Europe have unleashed theirs Strict restrictions In an attempt to disconnect the country from the World Financial Organization.

The central bank said it would announce later on Monday whether the stock would resume trading after the morning session was canceled. In terms of local currency, the country’s main index, the Moex index, fell about 30 percent in February.

Market moves came as the Ukrainian army claimed to have thwarted another night’s attack on Kiev on Monday, with columns of Russian troops repeatedly attempting to attack the capital.

The Ukrainian military says enemy troops continue to attack airports, air defense systems, critical infrastructure and residential areas across the country. Russian and Ukrainian military claims cannot be verified independently.

As an early indication of how Moscow is being pushed further to the margins of world markets, Norway said On Sunday Its $ 1.3tn oil fund, the world’s largest sovereign property fund, will begin to withdraw from the country, freezing its investments in Russian assets. BP, UK Energy Group Said It will divest its 20 percent stake in Rosneft, a Russian state-owned oil company, from 2013.

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The ruble has already been hit hard in the past week following US and European sanctions and sanctions.

The United States and its allies intensified those punitive measures on Saturday, targeting Russia’s central bank to prevent the use of international reserves. Western allies have agreed to cut some of their country’s lenders from the Swift news agency, which is an important infrastructure for global payments.

The Russians have been creating long queues to withdraw money from cash machines, and the central bank does not have a clear mechanism to stabilize its economy and currency.

Russia’s central bank last week sought to raise the ruble by selling foreign currency reserves. But weekend sanctions against the central bank compromise its intention to continue this support.

“Simply put, Russia’s ability to transact with any financial institution globally will be severely affected because most international banks in any jurisdiction use Swift,” Deutsche Bank analyst George Saravelos wrote in a note to customers.

Saravelos added that the financial markets will reflect serious risks to energy supplies, blocking investors’ willingness to buy risky assets and potentially dragging the euro.

“Money markets are likely to experience some downturn this week in the wake of the uncertainty of the asset freeze on global cash flow. The European Central Bank, the central bank and other central banks are expected to come forward to offer a strong recession if necessary, and we will not rule out meeting announcements,” he said. , The ruble and other European emerging market currencies are likely to come under pressure.

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Friday, Appraisal Agency S&P Global Reducing Russia’s credit rating to “junk” Status underscores the risk of a military attack on Ukraine causing further damage to the country’s financial markets.

Russia’s central bank on Sunday sought to calm market nerves, saying it would provide banks with unlimited liquidity. “The Russian banking system is stable and has sufficient capital and liquidity capacity to operate in any situation,” it said.

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