In the face of Western sanctions, the ruble collapsed by more than 20%. The situation would have been worse had it not been for the steps taken by the Russian authorities. Sooner or later, Moscow will have to normalize its policy.
Over the weekend and Monday, European Union countries, the United States, Great Britain, Japan, Canada and even Switzerland announced and partially implemented sanctions against Moscow, including freezing the assets of the Bank of Russia and isolating Russian banks from the SWIFT system. As a result, attempts to sell the ruble increased sharply, and with it increased pressure to weaken the Russian currency.
The Central Bank was cut off (at least partially) from access to foreign exchange reserves, which it could use to try to defend the currency against a sharp devaluation, so the Russian authorities turned to other tools.
The Bank of Russia raised the benchmark interest rate – from 9.5 percent. In addition, the central bank prevented foreign investors from selling securities, thus reducing the demand for foreign currency. At the same time, trading on the Moscow Stock Exchange was suspended. Late in the evening, President Putin issued a decree prohibiting the people of Russia from transferring money abroad. The Bank of Russia has also made it easier for commercial banks to access liquidity and ease capital regulations to avoid deepening panic in the sector, which would translate into the real economy. The Ministry of Finance has ordered commercial entities with foreign countries to sell 80 percent. Revenue in foreign currency.
As a result, the ruble “only” weakened by just over 20 percent. For the dollar, including the largest one-day discount since Russia’s bankruptcy in September 1998. On Friday, less than 84 rubles were paid for one green on the interbank market – 105 rubles on Monday, according to Bloomberg offers. But it most likely does not reflect reality – some market movements were interrupted by a partial ban on the sale of assets, US dollar / Russian ruble rates in exchange offices, banks and applications were clearly higher, and there was no foreign currency for retail clients. The exact value of the Russian currency is not known. True, the answer is certain: it depends – where and for whom.
On Tuesday at 8:30 Polish time, market prices clearly diverged. Bloomberg reports that the US dollar / Russian ruble exchange rate is over 100, while Google and Yahoo Finance: 91-92. According to the first source, today the rate is falling by about 2-3 percent, according to the second and third sources – by more than 10 percent. At 10:30 prices approached – the exchange rates of the US dollar against the Russian ruble are at 99-100, which means a decrease of 5-6%. In the afternoon, disagreements increased again – in the 14th range it was 99-103 rubles to the dollar.
Significant increase in the price of money, market closure and capital control These are extremely rare and controversial movements. They allow you to temporarily freeze the panic, or at least its visual effects, but in fact it does not dampen the sources of problems, but causes more problems, for example. In the short and long term, they discourage Russians and foreign capital from investing in ruble assets, for example keeping the Russian currency in their accounts or setting up their business in the country. With the normalization of the market, the problems should also arise. The image below illustrates the situation well.
Moscow may be hoping that the invasion of Ukraine will be completed by this point and that at least some sanctions will be lifted, reducing the scale of the market crash. However, he must be deeply disappointed, because this time Western leaders and societies are somewhat reluctant to let the unjustified Russian aggression against the sovereign state be forgotten.
Update: On Tuesday morning, the Russian Prime Minister announced that the ban on the sale of Russian assets to foreigners will come into force by presidential decree.