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Offshore RUB Holds Above 100 Following Crushing Western Sanctions

  • USD/RUB trades +1.93% higher in the offshore market 107.36, having retraced from a peak of 117.50 yesterday with liquidity challenges driving extensive volatility.
  • Western sanctions targeting roughly two thirds of Russia’s $630bn foreign reserves held overseas brought “fortress Russia” crashing down yesterday, as the West took its sanctions dampers out of play – leaving the RUB at the mercy of the markets.
  • The CBR’s reactive 10.5% rate hike, alongside numerous FX measures should have neutralized some impact on the RUB, but the longer-term impact of the crushing sanctions will likely be massive inflationary pressures and recession.
  • Both sides remain far apart on negotiations as we await word from Zelensky on the second round of talks, but experts hold little hope in an end to the assault as Russia amasses a 40-mile column to the northwest of Kyiv.
  • A ruined economy and little political victory have left Putin with greater incentives to escalate than de-escalate at this juncture, with the conflict looking set to extend further than previously anticipated.
  • USD/RUB should remain choppy in the 92-117 range for today, however, an eventual de-escalation would likely see RUB appreciate sharply due to yesterday’s massive rate hike.
  • For now, a tactical approach is required as the situation evolves on a daily basis. Intraday Sup1: 102.40, sup2: 100, Sup3: 98.50, Res1: 109.92, Res2: 112.0826, Res3: 115.04
MNI London Bureau | +44 020-3983-7894 |
MNI London Bureau | +44 020-3983-7894 |

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