Russian ruble falls to new lows after ratings downgrades

MOSCOW — The Russian ruble slid to new record lows against the dollar and euro on Thursday, after ratings agencies Fitch and Moody's downgraded Russia's sovereign debt to "junk" status.

At 1012 GMT (6:12 p.m. Philippines time), the ruble was more than 9% weaker against the dollar at 116.8 and down almost 8% against the euro at 125.1 on the Moscow Exchange, marking the first time the ruble has traded weaker than 110 to the dollar in Moscow and the first time it has breached 123 to the euro.

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

The finance ministry said it was halting purchases of foreign currency and gold this year as part of a suspension of parts of its fiscal rule—a move also aimed at easing pressure on the ruble.

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 Two.

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

Since Russian troops entered Ukraine on Feb. 24 the ruble is down close to 30% against the dollar, and analysts said on Thursday it would probably remain highly volatile.

The government has ordered Russian exporters to convert 80% of their foreign exchange revenues into rubles in another attempt to buttress the local currency, but people are still queuing up at banks to buy dollars as the ruble slumps.

"There's huge uncertainty around ongoing events, and there's going to be a lot of volatility, volumes will be a lot lower, liquidity will be incredibly poor," said Chris Turner, global head of markets at ING. "There's a lot of trapped foreign money in Russia at the moment."

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 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."

On Thursday, Russia's National Settlement Depository said coupon payouts on Russia's OFZ government bonds which were due on Wednesday had only been made to local holders, citing a central bank order barring payments to foreigners. — Reuters