Moscow — The ruble remained strong on Friday after hitting a record low the day before Russia began invading Ukraine. Meanwhile, the stock index soared following the biggest drop in the day, and central banks stepped up their support for sanctioned banks.
Mass sales on Thursday did not leave Russian assets intact. The fighting in Ukraine continued on Friday, Russian missiles attacked Kiev, families barked at shelters, and authorities instructed residents to prepare flame bottles to protect the Ukrainian capital.
By 1600 GMT, the ruble rose 2.6% against the dollar to 83.03 after hitting a record low of 89.60 on Thursday’s highly volatile trading.
Against the euro, the ruble hit a record low of 101.03 in the interbank market on Thursday and remained strong 2% to trade at 93.27.
This currency was supported by the first Russian central bank currency intervention since 2014, when Russia annexed Crimea from Ukraine.
A bite of sanctions
The market was also digesting new strict western sanctions on Russia.
This measure has been suspended without separating Russia from SWIFT’s global interbank payment system or targeting oil and gas exports, and Russia has built formidable financial defenses for the past seven years.
“But the possibility (of disconnection from SWIFT) remains, and uncertainty is more damaging to the market than the worst sanctions. Focused on Ukraine’s developments, bargaining potential, and further sanctions. “Masu,” said the BCS broker in a memo.
However, analysts said Russia’s economy is unlikely to withstand the onslaught of coordinated sanctions from the West in the long run.
The central bank said it has strengthened its support for banks, which will prevent customers of some Russian banks under western sanctions from using their cards abroad or on Apple and Google’s mobile payment systems.
Russia’s stock index held back significant losses after a record day’s fall on Thursday.
The dollar-denominated RTS index rose 26.1% to 936.9 points. The ruble-based MOEX Russia index rose 20% to 2,470.5 points, breaking out of its lowest level since Thursday’s hit of 1,681.55 in early 2016.
JP Morgan said it expects the top five Russian publicly traded companies to pay a $ 18 billion dividend and is interested in figuring out what the dividend payments will be.
“Will the licensed Russian financial system be willing to pay that amount primarily to foreign shareholders when they are excluded from the financial system?”
According to a Russian news agency, VTB Bank on Friday said it could pay a dividend for 2021, but will analyze all possibilities from now to April.
The market expects further action from central banks to deal with inflation risk. The depreciation of the ruble after the invasion of Ukraine is expected to lower Russia’s standard of living and already cause inflation close to 9%.
According to analysts, the central bank could implement an unplanned rate hike, such as in late 2014, when the ruble plunged and raised the key rate from 10.5% at midnight to 17%.
“We believe that an unplanned rapid increase of over 400bp by CBR is likely to result in a key rate of over 13%,” Morgan Stanley said in a memo.
Alor Brokerage said the central bank could raise interest rates by 2-3 percent in the near future, aiming to keep the ruble close to $ 1.80 and € 90.
The central bank, which aims to raise inflation to 4%, will consider raising rates at its board meeting on March 18.
By Andrey Ostroukh and Alexander Marrow