The Russian rouble recovered from its weakest point in nearly two years to strengthen in volatile trading while Russian stocks fell on Tuesday after Russia sent troops to the so-called Donetsk People’s Republic and Luhansk People’s Republic after recognizing them as independent nations.
Russia’s longtime leader’s announcement drew immediate international condemnation. Unsurprisingly, the West is now expected to announce new coordinated sanctions against the Russian Federation. Sanctions could target major financial institutions, block Russia’s access to electronics supplies, etc.
The rouble fell to 80.97 against the U.S. dollar, a level last seen on March 23, 2020, before rebounding to stand 0.9% higher at 79.05 as of 11:17 GMT.
More importantly, that resurgence came as Russia said it would only recognize the regions’ independence within the boundaries that separatists currently control. Furthermore, Ukrainian President Volodymyr Zelenskiy played down the prospect of a large-scale conflict with the Russian Federation.
Rouble and tensions
The Bank of Russia said it was ready to take all necessary measures to support financial stability.
Against the euro, the rouble gained 0.4% to 89.84. Before that at some point the rouble fell to its lowest level against the euro since April 2021.
One day earlier, the rouble suffered its biggest one-day drop since the outbreak of the Covid-19 pandemic. Russian markets fell on Western fears that Vladimir Putin’s moves might presage a major war.
Brent crude oil, a global benchmark for Russia’s main export, rose 2.8% to $98.11 a barrel. However, that did little to support Russian assets. As a reminder, when oil prices were last near current levels in September 2014, the rouble stood around 40 to the U.S. dollar.
The dollar-denominated RTS index dropped 3.9% to 1,160.3 points after hitting 1,075.98, its lowest since November 2020. The rouble-based MOEX Russian index dropped 4.1% to 2,913.9 points.
