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The Russian ruble crashed more than 40% to a new all-time high against the dollar, oil prices jumped up to $7 a barrel and gold prices gained 1%, as financial markets opened for the first time since the announcement by Western countries. broader economic sanctions against Russia for its invasion of Ukraine.
Sanctions include blocking some Russian banks from the Swift international payment system, leading investors to expect a run on Russian currency as people scramble to exchange their rubles for dollars and other denominations .
The Russian central bank was quick to react and raised its key rate to 20% from 9.5% this morning to stem the slide in the ruble which will lead to higher inflation. Russia has also ordered companies to sell 80% of their foreign currency earnings, the central bank and finance ministry said.
This follows a number of measures announced by the Bank of Russia on Sunday to counter the economic impact of Western sanctions. He said he would resume buying gold domestically, launch a no-limit buyout auction and ease restrictions on banks’ open currency positions. It also expanded the range of securities that can be used as collateral to obtain loans and prohibited brokers from selling Russian securities to foreigners.
the the ruble fell to 119 per dollar in Asian tradingand then traded down 28.8% to 118, from its closing price of 83.64 on Friday.
Russian markets will open at 10 a.m. local time, three hours later than usual. European stock markets are expected to fall at the opening bell after big gains on Friday.
Crude Brent rose back above $100 a barrel, after falling below that threshold on Friday (it touched close to $106 a barrel on Thursday when Russia began its invasion of Ukraine). This morning, the global benchmark is trading again at seven-year highs, up $5 at $103.01 a barrel, up 5.2%, while US light crude is up. advance $5.46 to $97.08 a barrel, a 6% gain.
Gold benefited as a safe-haven investment, with spot gold rising 1% to $1,905 an ounce.
In a sign that the war in Ukraine is not going as planned for Russia, Vladimir Putin on Sunday ordered his army to put Russia’s nuclear deterrent forces on high alert, a rather chilling development. The United States replied that this was a “totally unacceptable” escalation.
But there was also hope for talks: Ukrainian President Volodymyr Zelenskiy announced that a delegation would meet Russian officials without preconditions at his country’s border with Belarus, but he was far from certain. clear that Putin was willing to engage in talks that did not involve meeting his demands for Ukraine to accept partition and disarm.
Things have moved quickly since last Monday, when Putin announced that he officially recognized breakaway regions in eastern Ukraine and ordered the dispatch of troops to the area. This was followed by Russia’s full-scale invasion of Ukraine in the early hours of Thursday, and a Russian assault on the capital, Kyiv, on Friday and Saturday.
Heavy fighting, also in Ukraine’s second-largest city, Kharkiv, prompted the United States, Britain, the EU and Canada to block Russia’s access to the international banking payment system on Saturday. Swift, after growing pressure for tougher penalties.
Berenberg analyst Holger Schmieding said:
The exclusion of major Russian banks representing 70% of the Russian banking market from the SWIFT system to make payments and the perhaps even more ambitious attempt to limit the use of Russian foreign exchange reserves of around $630 billion may cause problems for finance and non-financial companies outside of Russia. The precise impact is difficult to predict in advance. But we would expect central banks, regulators and finance ministers to ensure that the measures do not cause a major financial crash in the advanced world beyond temporary friction.
Last night, British oil giant BP bowed to pressure to sell its stake in Russian state oil company Rosneft. The firm announced it was divesting its 19.75% voting stake in Rosneft, saying Russia’s invasion of Ukraine represented a “fundamental shift” in relations with Moscow. The stake was valued at $14bn (£10.4bn) at the end of last year. It is unclear to whom BP would sell it.
The oil company said its chief executive, Bernard Looney, was resigning from Rosneft’s board with “immediate effect”. Former BP CEO Bob Dudley also resigned from the board of Rosneft, chaired by former German chancellor Gerhard Schröder and headed by Igor Sechin, a close ally of President Vladimir Putin.
Russian airlines face an almost complete blockade of westbound flights over Europe after being barred from the airspace of nearly 30 countries. On Sunday evening, European Commission President Ursula von der Leyen said the entire bloc would close its airspace to Russian planes.
And Britain has compiled a “blacklist” of Russian oligarchs who will face sanctions over the next few weeks, according to Foreign Secretary Liz Truss. She said there were more than 100 billionaires in Russia and some of them would face “an ongoing program of sanctions” as officials piece together the evidence to justify freezing their assets in the UK.
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