Forex Market: USD/RUB touches daily lows despite speculation the US and EU will impose further sanctions on Russia

The Russian ruble gained ground against the US dollar on Monday, despite expectations economic sanctions imposed by the US and the European Union will intensify in response to the annexation of Crimea, which may even push Russia toward a recession.

USD/RUB touched a daily low at 36.044 at 11:40 GMT, after which consolidation followed at 36.093, losing 0.43% on the day. Support was likely to be received at March 20th low, 36.018, while resistance was to be encountered at March 21st high, 36.486.

Few Russian banks, including the state-run VTB Capital were reported by Bloomberg as saying the worlds ninth-largest economy may contract for at least two quarters as sanctions for annexing Crimea rattle markets, reduce investment and increase borrowing costs. Sanctions so far have been limited to individual visa bans and asset freezes, but will probably be expanded to address specific areas of the Russian economy.

On Friday, Russia’s President Vladimir Putin signed legislation needed to annex Crimea and its port of Sevastopol. This happened after Washington expanded its list of individuals to be sanctioned due to their close ties to President Vladimir Putin. Broadening of the sanctions to more than 20 prominent Russians marked an escalation of diplomatic pressure against President Putin for Moscow’s intervention in Ukraine.

Leaders of the G7 nations will hold talks on the sidelines of a nuclear summit in The Hague today regarding their response to Moscow’s latest actions. According to NATO, Russia had amassed a very sizable force on its Ukrainian border.

The Micex Index of shares lost as much as 0.7%, after plunging 1% on Friday. The index has lost more than 13% so far this year.

The ruble, weakened 8.9% against the US dollar, making it the second-worst performer behind Argentina among 24 developing-market currencies tracked by Bloomberg.

Meanwhile, greenback’s demand was pressured after a report by Markit Economics revealed its preliminary index of US manufacturing activity fell to 55.5 in March, down from 57.1 a month ago and compared to a smaller decline to 56.5, forecast by analysts. A value above the key level of 50.0 is indicative of expansion in the sector.

Elsewhere, USD/JPY hit a session high at 102.64 at 08:00 GMT, after which the pair trimmed daily losses to trade little changed at 102.19 at 15:06 GMT. Support was likely to be received at March 21st low, 102.02, while resistance was to be met at March 19th high, 102.68.