Feb 25 (Reuters) – The Russian rouble steadied and pulled away from record low territory on Friday, but the currency was heading for its worst weekly performance since the onset of the pandemic as Russia pressed ahead with its invasion of Ukraine.
Missiles pounded Ukraine’s capital city Kyiv and Ukrainian President Volodymyr Zelenskiy pleaded with the international community to do more, saying sanctions announced so far were not enough. Read full story
Western countries including the United States and the European Union unveiled financial sanctions on Moscow billed as far stronger than earlier measures, including blacklisting its banks and banning technology imports.
But they stopped short of forcing Russia out of the SWIFT system for international bank payments.
The rouble RUB= rose 1.9% against the dollar, rebounding from a record low it hit on Thursday, as the central bank announced FX interventions for the first time since 2014. Still, the currency is set for weekly declines of nearly 7%, its worst week since March 2020.
Stocks in the region also suffered, with the dollar-denominated RTS index .IRTS and the rouble-denominated MOEX index .IMOEX on track for their worst weekly declines in history.
“Russia’s invasion of Ukraine has been a surprise, given the substantial economic costs for Russia,” said Vincent Chaigneau, head of research at Generali Investments.
“The chances of a timely de-escalation seem low, with Putin seeing Western governments generally weak and fractured, with sharply divided U.S. political class, President Biden likely to lose mid-term elections, fresh German government, upcoming French elections, chaotic energy transition… this may explain the timing of the attack and reduces the chance of a quick resolution.”
Investors are now awaiting more central bank action to address high inflation. An unplanned interest rate hike as it did in late 2014, when Russia annexed Crimea from Ukraine, was also on the cards.
Russian sovereign dollar bonds extended gains after Thursday’s selloff, according to Tradeweb. RU000A1006T7=TE
The MSCI’s emerging market stocks index .MSCIEF added 1.1%, while its currencies counterpart .MIEM00000CUS gained 0.3%. Both indexes were set for weekly declines.
J.P.Morgan downgraded its view on emerging market currencies in Europe, Middle East and Africa regions to “underweight” from “market weight” on global market ramifications from Russia’s invasion of Ukraine.
Turkey’s lira TRY= steadied after falling as much as 5% a day earlier, touching two-month lows. The lira had stabilised since a crisis in December, supported by a scheme that protects lira deposits against depreciation and costly currency market interventions from the central bank.
South Africa’s rand ZAR= rose 0.3%, taking comfort from higher gold prices, while the Czech crown EURCZK=, Hungary’s forint EURHUF= and the Polish zloty EURPLN= clawed back some losses against the euro.
For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh
For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX
For TOP NEWS across emerging markets Read full story
(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Krishna Chandra Eluri)
