Ruble Drops after Russia Bans US and EU Food Imports

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Ruble Drops after Russia Bans US and EU Food ImportsThe ruble declined for the sixth consecutive day while Russian bonds plunged after the government rolled out 12-month prohibition on certain food imports from the European Union and the US.

The ruble tumbled 0.1 percent versus the dollar to trade at 36.2250 per dollar at 1:45 p.m. in Moscow, as it looked set to record its weakest level since March 21. The yield on government bonds that mature in February 2027 increased one basis point to 9.81 percent, a new record. The Russia’s currency held steady at 48.465 versus the euro and 0.1 percent lower against the central bank’s benchmark basket of dollars and euros at 41.7358.

Russia prohibited imports of fish, meat, dairy products and fruits and vegetables from Norway, Canada and Australia and the U.S. after the latter and the European Union imposed sanctions on its own industries for its interference in the Ukraine civil war.

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“The market is still ruled by geopolitics,” with fundamental factors giving way to “speculative and portfolio flows,” Dmitry Polevoy, a Moscow-based chief economist for Russia and the Commonwealth of Independent States at ING Groep NV, told Bloomberg. “The ruble is not sold off more heavily as fewer imports are actually good for it.”

Ukraine government forces have launched an offensive against rebels in the eastern part of the country as Russian military builds up on the border with its neighbor.

Analysts expect the ban on food imports to negatively affect the Russian economy over the long term, resulting in increased meat prices due to a drop in supply. Since meat prices account for up to 9 percent of the CPI basket, it is widely expected that inflation will surge. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com