February 23, 2022
By Alexander Marrow
MOSCOW (Reuters) -The Russian rouble weakened on Wednesday, sliding past 80 to the dollar and 90 to the euro as investors took stock of Western sanctions imposed on Russia for ordering troops into separatist regions of eastern Ukraine.
Western nations responded to President Vladimir Putin’s recognition of separatist enclaves in the Donbass region of eastern Ukraine with plans to target banks and elites. Germany froze a major gas pipeline project from Russia, while London and Washington targeted Russian debt.
Meanwhile, the Russian-backed leader of the breakaway Donetsk region said on Wednesday he wanted to peacefully settle its borders with Ukraine but reserved the right to ask Russia for help, fanning Western fears of a full-scale incursion, something Moscow denies it is planning.
By 1320 GMT, the rouble was 1.5% weaker against the dollar at 79.97, earlier sinking to 80.33. It had lost 1.5% to trade at 90.77 against the euro.
Russia was celebrating the Defender of the Fatherland public holiday on Wednesday, with many traders away from their desks, but some trading went on.
The initial round of new sanctions stopped short of targeting major financial institutions, meaning their impact could be rather symbolic.
The United States broadened restrictions on trading of Russian government debt, prohibiting participation in the secondary market for bonds issued after March 1, a move that analysts said might have a moderate impact near-term but could be a step towards a harsher measure.
Russia’s finance ministry on Wednesday said it would offer only new series of OFZ government bonds from now on, in response to Washington’s move.
Russia’s sovereign dollar bonds suffered with longer-dated bonds down around 7 cents in the dollar at 88.01 cents.
Ukraine’s longer-dated dollar bonds suffered their worst day on record. Ukraine’s 2040 GDP linked-issue tumbled as much as 12.3 cents to 45.75 cents on the dollar, suffering its worst daily drop since issuance in 2015 and trading at levels last seen in 2017, data from Tradeweb showed.
The 2032 bond dropped nearly 9 cents to fall to a record low of 63.187 cents.
The premium demanded by investors to hold Russian and Ukrainian debt over safe-haven U.S. Treasuries also widened sharply to 405 basis points and 1330 bps respectively – both at their widest level since 2015
Brent crude oil, a global benchmark for Russia’s main export, was down 0.1% at $96.71 a barrel.
Russia’s dollar-denominated RTS index was down 1% to 1,214.1 points.
(Reporting by Alexander Marrow; additional reporting by Karin Strohecker in London; Editing by Tomasz Janowski and Chizu Nomiyama)
