November 26, 2022

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The euro and the ruble fell to an all-time low as the West strengthened sanctions against Russia

The euro and the ruble fell to an all-time low as the West strengthened sanctions against Russia

  • European currencies hit by Ukraine crisis
  • The safe-haven Swiss franc, the yen and the rise of the dollar
  • Foreign exchange volatility is increasing

LONDON (Reuters) – The ruble fell nearly 30 percent on Monday, the euro fell nearly 1 percent against the dollar, and the Swiss franc and Japanese yen were in high demand as a safe haven after Western countries imposed tough new sanctions on Russia. its conquest of Ukraine.

Western allies have stepped up efforts to punish Russia with new sanctions that include cutting some of its banks from the SWIFT financial network, limiting Moscow’s ability to deploy its $630 billion foreign reserves and closing its airspace to Russian aircraft. Companies also reported plans to divest. Read more

Adding to the market nervousness, Russian President Vladimir Putin put Russia’s “deterrence forces” – which use nuclear weapons – on high alert. Read more

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Analysts said that the ruble fell to a record low, as it fell to 120 against the dollar as these measures are expected to destroy the country’s economy and prevent the Central Bank of Russia (CBR) from using its foreign reserves for direct interventions in the foreign exchange markets.

“A central bank asset freeze would largely cut off CBR’s access to its euro and US dollar reserves, which collectively make up about 50% of its total foreign reserves,” said Kristoffer Kjær Lomholt, senior analyst at Danske Bank.

The ruble fell 30 percent to 109 per dollar at 0900 GMT, even after the Russian Central Bank sharply raised its key interest rate on Monday to 20 percent from 9.5 percent, a day after announcing a series of measures to support domestic markets. Read more

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Meanwhile, the euro fell 0.8% to $1.11745 against the dollar and to 129.2 against the yen. It fell 0.9% against the Swiss franc.

The dollar’s rally eased, with the dollar settling at 97.128 against a basket of other currencies.

In general, volatility has increased in the FX markets, with one commonly followed measure reaching its highest level since December 2020 (.dbcvix).

Other European currencies also fell sharply against the dollar. The Swedish crown fell 1.7% to 9.5360 kroner and the Norwegian crown fell 1% to 8.9090 kroner.

Markets are now pricing in a 90% probability that the US Federal Reserve will raise interest rates by 25 basis points at its March meeting, according to CME’s Fedwatch tool, as the invasion put an end to speculation that the Fed will jump by 50 basis points. .

Investors have also scaled back their bets that the European Central Bank will raise interest rates in 2022.

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(Joyce Alves reports). Editing by John Stonestreet

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