Ruble Extends Declines as Investors Fret over Looming Sanctions

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Ruble Extends Declines as Investors Fret over Looming SanctionsThe Russia’s ruble plummeted as it headed to record its steepest decline in six months after the European Union considered proposals to introduce fresh sanctions on Russian banks and companies.

The ruble fell 0.5 percent to trade at 35.7240 per dollar at 2 p.m. in Moscow as it looked set to record a 5.1 percent drop in July, its poorest showing since January. The yield on bonds maturing on February 2027 grew 9 basis points to 9.42 percent, its strongest level since May 6.

The government halted a ruble-denominated bond auction scheduled tomorrow owing to what the    Finance Ministry termed as “market conditions”.

The ruble also retreated 0.6 percent to trade at 48.0120 versus the euro and fell by the same rate against the central bank’s benchmark basket of euros and dollars to 41.2616, reported Bloomberg News.

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U.S. Deputy National Security Adviser Tony Blinken said on Monday that the EU and the U.S. may roll out new sanctions today targeting important segments of Russian economy such as energy, finance and defense over President Vladimir Putin’s backing of rebels in Ukraine’s crisis. The EU governments will also freeze assets of some Putin allies, besides imposing travel bans.

Sberbank CIB strategists expect the severity and size of the sanctions to influence the ruble’s stability. The sanctions are expected to push interest rates up and trigger uncertainty in the local business environment, which may affect investment.

Renaissance Capital economists are less optimistic that the Russian economy will expand by 1.6 percent this year, expecting it to grow at a much-slower 1 percent.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