The White House Replies to Russia’s Decision to Raise the Alert Level for Its Deterrent Troops

KEY POINTS :-

  • According to Factset statistics, the ruble was trading as low as 119 per dollar when offshore trade began on Monday morning around Asia hours, down from almost 84 per dollar the previous day.
  • In a statement issued Sunday, Russian President Vladimir Putin said his country’s nuclear deterrent forces were on full alert.
  • Following Russia’s unprovoked war on Ukraine, President Joe Biden announced numerous rounds of penalties on Russian banks, the country’s sovereign debt, as well as Russian President Vladimir Putin and Foreign Minister Sergey Lavrov, among others.

In the early hours of Monday morning, the Russian ruble plunged over 29 percent against the dollar, hitting an all-time low as markets evaluated the effect of sanctions on Russia in the wake of a mounting reaction against the Kremlin’s invasion of Ukraine. Following the closing of the previous day’s trading session, according to Factset statistics, the ruble was trading as low as 119 per dollar when offshore trade got underway early this morning during Asian trading hours. The ruble recovered some of its losses later in the day and was last trading at 105.27 during the Asian afternoon hours.

Russia’s central bank said on Monday that it has blocked its brokers from fulfilling sell orders from foreigners as part of its efforts to minimise the repercussions from the financial market crisis. It also announced that it will free up 733 billion rubles ($8.78 billion) in local bank reserves in order to increase liquidity in the economy. It occurred at a time when the situation between Russia and Ukraine showed no signs of abating. Following days of air, sea, and land bombardment of Ukraine, Russian President Vladimir Putin ordered the deployment of his country’s nuclear deterrent forces on full alert on Sunday.

Despite the fact that Russia’s incursion into Ukraine continues, Ukraine maintains control of its capital, Kyiv, and its second-largest city, Kharkiv. Russian military vehicles invaded Kharkiv on Sunday, prompting reports of violence and the ordering of inhabitants to take refuge in shelters in the city centre.

President Joe Biden reacted to Moscow’s unjustified assault on Ukraine last week by announcing a series of rounds of penalties on Russian banks, the country’s sovereign debt, as well as against Russian President Vladimir Putin and Foreign Minister Sergei Lavrov. In a landmark agreement reached over the weekend, the United States, its European allies, and Canada decided to block important Russian banks from using the SWIFT interbank messaging system, which links more than 11,000 banks and financial institutions in more than 200 countries and territories.

The European Union also stated on Sunday that it will close its airspace to Russian planes.

Reuters reports that scenes of Russians standing in lengthy queues to withdraw cash from ATMs were recorded over the weekend, amid concerns that the sanctions may cause cash shortages and payment disruptions.
A number of people were concerned that once Russian banks were barred from using SWIFT, their bank cards might stop working or that cash withdrawals would be restricted.

Bipan Rai, senior macro analyst at CIBC Capital Markets, told CNBC on Monday morning before the start of offshore trade that he expected the Russian currency to have a “very large, severe decline” in the near future.
The central bank of Russia would most likely have to raise interest rates “quite aggressively” and sell gold in a situation in which the Russian ruble had “very much lost all value outside of the nation,” according to him.

“And they’re going to do it with governments that are sympathetic to them in the first place. ” “And that looks to be reducing by the day,” he remarked, referring to the decision to sell the precious metal.

The bottom of the ruble, in my opinion, isn’t really in sight, or at the very least it doesn’t seem like we are about to see it. In an interview with CNBC’s “Street Signs Asia” programme, Rai said that “there is still plenty of potential for weakness to come.”