Russian rouble sinks to near 15-mth low vs dollar as Ukraine tensions bite

The Russian rouble plunged to a near 15-month low on Wednesday, diving past the 80 threshold versus the dollar as tensions over Ukraine escalated, with Western nations promising hefty sanctions against Moscow should it invade. Volatility has plagued Russian markets in recent weeks amid Western fears Russia is poised to invade its neighbour, something Moscow has repeatedly denied.

The Russian rouble plunged to a near 15-month low on Wednesday, diving past the 80 threshold versus the dollar as tensions over Ukraine escalated, with Western nations promising hefty sanctions against Moscow should it invade.

Volatility has plagued Russian markets in recent weeks amid Western fears Russia is poised to invade its neighbour, something Moscow has repeatedly denied. The West has threatened sanctions https://www.reuters.com/markets/europe/how-financial-western-sanctions-might-target-russia-2022-01-19 with profound economic effects if Russia does make an incursion. By 1618 GMT, the rouble was 2.1% weaker against the dollar at 80.26, earlier hitting 80.4125, its weakest point since Nov. 2, 2020.

The rouble lost 1.9% to trade at 90.50 to the euro , crossing the 90 threshold for the first time since late April 2021. Russia warned on Wednesday that imposing sanctions on President Vladimir Putin personally would not hurt him but would be "politically destructive", after U.S. President Joe Biden said he would consider such a move if Russia invaded Ukraine.

The U.S. embassy in Ukraine urged American citizens to consider leaving the country, citing the increased threat of Russian military action. "Geopolitical swings still remain a bet on a binary outcome – the tanks roll across the Ukrainian border or they do not; if they do not, there will be swift upside, if they do, there will be dramatic downside," BCS Global Markets said.

Citing persistent volatility, the finance ministry cancelled weekly OFZ treasury bond auctions, usually held on Wednesdays. Russia's 10-year OFZ yields hit their highest since early 2016 at 9.86% early on Wednesday. Yields move inversely to price. Brent crude oil, a global benchmark for Russia's main export, was up 2.3% at $90.25 a barrel, hitting a more than seven-year high.

Russian stock indexes clung to that support, still attempting to recover from a massive sell-off on Monday. The dollar-denominated RTS index was up around 2%, while the rouble-based MOEX Russian index gained around 3%.

"Shares in Russian companies are now trading at very low valuations and offer some of the most attractive dividend yields in the world," Alfa Bank said in a note.