Rouble falls to record lows after ratings downgrades

[MOSCOW] The Russian rouble slid further on Thursday (Mar 3), hitting record lows against the US dollar and euro, after ratings agencies Fitch and Moody's downgraded Russia's sovereign debt to "junk" status citing the impact of Western sanctions.

At 0830 GMT, the rouble was more than 10 per cent weaker against the US dollar at 117.5 and had lost over 7 per cent against the euro to trade at 124.1 on the Moscow Exchange, marking the first time the rouble has traded above 110 to the US dollar in Moscow.

The Russian central bank imposed a 30 per cent commission on foreign currency purchases by individuals on currency exchanges - a move that brokers said appeared designed to curb demand for US dollars - but that did little to halt the rouble's slide.

Russia's financial markets have been thrown into turmoil by sanctions imposed over its invasion of Ukraine, the biggest attack on a European state since World War II.

Russia calls its actions in Ukraine a "special operation" that it says is not designed to occupy territory but to destroy its southern neighbour's military capabilities and capture what it regards as dangerous nationalists.

Since Russian troops entered Ukraine on Feb 24, the rouble is down close to 30 per cent against the US dollar, and analysts said on Thursday it would probably remain highly volatile. The government has ordered Russian exporters to convert 80 per cent of their forex revenues into roubles to support the local currency, but people are still queuing up at banks to buy US dollars as the rouble slumps.

Trading on the Moscow Exchange's stock section remained largely closed on Thursday, a fourth day of restrictions ordered by the central bank.

Overnight, Fitch said that US and European Union sanctions prohibiting any transactions with the Bank of Russia would have a "much larger impact on Russia's credit fundamentals than any previous sanctions". Moody's said the severity of the sanctions"have gone beyond Moody's initial expectations and will have material credit implications".

S&P lowered Russia's rating to sub-investment grade last week.

Russia's invasion of Ukraine and the sanctions imposed in response have led to dire warnings about the Russian economy, with the Institute of International Finance predicting a double-digit contraction in growth this year.

On Wednesday, index providers FTSE Russell and MSCI said they would remove Russian equities from all their indexes, after a top MSCI executive earlier this week called Russia's stock market "uninvestable". REUTERS