Sanctions threat affect Russian rouble

The Russian rouble has fallen to a record low against the dollar as fears grow of further sanctions.

On Friday (August 29th) the rouble dropped to 37.03 per dollar, representing the worst valuation since it was restructured in 1998. There are now concerns that further sanctions from the European Union (EU) and the US could prove detrimental for the currency once again. The EU has given Russia a one-week ultimatum to reverse its operations in Ukraine or face more sanctions.

Tensions between the West and Russia have intensified in recent days after Nato accused Russia of illegally crossing Ukraine's border, something which Russia has strongly denied. Secretary-general Anders Fogh Rasmussen said Russia had made a "blatant violation" of Ukraine's sovereignty and continues to support Pro-Russian separatists in the region.

Peace talks were held between Ukrainian president Petro Poroshenko and Russian president Vladimir Putin in Minsk last week but the "disappointing" result has impacted on the currency. Russia's central bank had previously pledged to intervene less when it came to the rouble's valuation adding that it would abolish a trading corridor from next year.

This trading corridor limits the swing in the bank's valuation of the rouble in comparison to other currencies such as the dollar and euro. Russia currently has over $400 billion (£240.4 billion) of foreign currency reserves which allows it to spend dollars to purchase roubles in the market when its economy is weak.

Alongside the drop in rouble value, the nation's stocks also suffered as investors brace for potential new sanctions. The RTS Index dropped 1.9 per cent to 1,196, the first time it has fallen below the 1,200 mark since August 8th. The rouble-based MICEX Index had also declined by 1.3 per cent to 1,405.

Find up to date information on the currency market at City Index.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.