Forex Market: Russian Rouble plummets to an all-time low against US Dollar after severe Western sanctions, Bank of Russia raises key interest rate to 20%

Russia’s Rouble plunged to an all-time low against the US Dollar on Monday after the West imposed a severe set of sanctions against Moscow, including sanctions on Russian currency reserves.

The United States and allies on Saturday moved to block the access of some Russian banks to the SWIFT international payment system as further punishment for Russia’s continuing military assault against Ukraine.

“We will hold Russia to account and collectively ensure that this war is a strategic failure for Putin,” the leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada and the United States wrote.

“Even beyond the measures we are announcing today, we are prepared to take further measures to hold Russia to account for its attack on Ukraine.”

The move followed earlier sanctions from last week imposed on major Russian banks as well as on Russia’s President Vladimir Putin himself.

In response to Western sanctions, Putin on Sunday ordered his military command to put nuclear-armed forces on high alert.

The USD/RUB pair soared to an all-time high of 119.50 during the Asian trading session on Monday, which translated into almost 30% depreciation for the Rouble compared to Friday’s close.

At market opening in Moscow today the currency pair was up 15% to 95.48. According to Promsvyazbank analysts, the pair could trade within a range of 100-120 during the day.

Prior to Moscow opening, Rabobank analysts warned that currency reserve sanctions removed what little support the Russian currency had.

“Even the gold is not liquid if nobody can use FX in exchange for it. There will be a complete collapse in the rouble today…” the analysts wrote in an investor note, cited by Reuters.

Meanwhile, in an emergency move earlier on Monday Russia’s central bank raised its benchmark interest rate from 9.5% to 20%, while authorities advised export-oriented companies to sell foreign currency.

“External conditions for the Russian economy have drastically changed,” Bank of Russia said in a statement.

“The increase of the key rate will ensure a rise in deposit rates to levels needed to compensate for the increased depreciation and inflation risks. This is needed to support financial and price stability and protect citizens’ savings from depreciation.”

The Russian central bank also announced a set of measures over the weekend in support of local financial markets. It said it would resume purchasing gold on the local market, initiate a repurchase auction with no limits and ease restrictions on commercial banks’ open foreign currency positions.

Brent crude oil, a global benchmark for Russia’s main export, was losing 0.43% on Monday to $97.98 per barrel. Earlier in the trading session the commodity rose as high as $105.10 per barrel, which has been its strongest price level since February 24th ($105.74 per barrel).

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 83.5067
R1 – 85.2706
R2 – 87.5588
R3 – 89.3227
R4 – 91.0866

S1 – 81.2185
S2 – 79.4546
S3 – 77.1664
S4 – 74.8782