The ruble plunged after Ukraine’s military spokesman Andriy Lysenko told reporters that troops had damaged part of a Russian military convoy that had crossed into Ukraine, erasing a weekly advance that had been fuelled by optimism that peace is imminent.
The ruble declined 0.5 percent to trade at 36.2000 per dollar as of 5:51 p.m. London time, wiping out an advance of 0.4 percent this week. Investors scampered for safer assets such as the U.S. dollar, yen and the Swiss franc after Ukrainian forces engaged directly with Russian soldiers, raising fears that the conflict will escalate further. The Russian convoy is said to have crossed overnight into Ukraine through a rebel-controlled part of the border.
“It certainly has the potential to be the start of something much bigger and more serious than we’ve seen so far, given that it puts Ukrainian forces into direct conflict with Russian forces,” Neil Shearing, a London-based chief emerging-market economist at Capital Economics Ltd., told Bloomberg News. “It now seems to be fairly clear that Russian military vehicles have passed into Ukraine. If this is the beginning of something more serious, it would have serious market implications.”
Ukraine’s hryvnia, which is the worst performer in the world in August, fell 1.3 percent against the dollar, bringing its weekly loss to 4.4 percent since last Friday as Ukrainians sold the currency on speculation that Russian forces may launch an invasion.
The Micex Index of stocks advanced 0.7 percent to close at 1,417.82 in Moscow to bring its total weekly gain to 5.2 percent. This is the fastest gain since the five day s through March 21. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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