Ruble Sinks to Record in Moscow With Ratings Deep in Junk Zone
(Bloomberg) -- The ruble sank to a record low against the dollar in intraday trading in Moscow after ratings services lowered Russia's credit score deep into junk territory.
International sanctions in response to Russia's attack on Ukraine have forced the central bank to impose capital controls and temporarily shutter the country's equity and bond markets. Only currency trading is going ahead in a shortened daily session.
The ruble dropped as much as 10% to 118.35 per dollar before erasing the losses at the close in Moscow. In offshore trading the ruble was down 2.3% at 104.7787 as of 7:06 p.m.
The ratings moves by Fitch Ratings and Moody's Investors Service offset any support for the currency from a new central bank requirement that brokers charge a 30% commission on hard-currency purchases by individuals. The move, reported by Interfax, is intended to “equalize competitive conditions between banks and brokers,” the news service reported.
“The ratings downgrade increased pressure on Russian assets and, as a result, the new measures from the central bank haven't had a big impact on the exchange rate so far,” said Viktor Grigoriev, an analyst at Bank St. Petersburg. The ruble could sink further to 120 per dollar, he said.
The Default Question Hangs Over Russia's Frozen Bond Market
“The size of the commission corresponds to the current volatility in trading on the exchange and it reduces the arbitrage opportunities available,” Rosbank analysts wrote in a note.
Fitch cut Russia's sovereign credit ratings six levels to single B -- deep into junk status -- on Wednesday. Moody's followed on Thursday with a similar downgrade to a junk B3 rating. MSCI Inc. and FTSE Russell, meanwhile, are removing Russian equities from their widely-tracked indexes.
“We assume U.S. sanctions prohibiting transactions with the Ministry of Finance will not impede the servicing of Russia's sovereign debt,” Fitch said in its statement. “But this is unclear and the risk of such a severe measure has increased markedly.”
Russia's ‘Uninvestable' Stocks Cut by MSCI, FTSE Russell
©2022 Bloomberg L.P.
With assistance from Bloomberg
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