Russian ruble sinks on US reports to launch new sanctions

The Russian ruble slipped Thursday after reports that a new round of US sanctions against Moscow were to be announced, potentially targeting the country’s sovereign debt.

Washington is preparing to unveil the new measures punish Russia for its alleged interference in the US elections and hacking attacks, US media reported, citing anonymous sources. They will target multiple individuals and organizations and could include restrictions on trading in newly issued public debt.

The ruble fell 2.2% early in Thursday to around 77.5 per US dollar, wiping out gains in the Russian currency released after a phone call Tuesday between US President Joe Biden and his counterpart Vladimir Putin, when the two leaders discussed a potential joint summit aimed at easing tensions between two countries.

A new set of US sanctions, which would come on top of a long list of restrictions first imposed in 2014 after Moscow’s annexation of Crimea, is long overdue.

The Biden administration has begun development of measures punish Russia after US intelligence officials said a large-scale hack of at least nine federal agencies and 100 companies, called the SolarWinds hack, was “likely of Russian origin,” said sources told the Financial Times in February.

The United States also condemned the recent arrest and imprisonment of Russian opposition activist Alexei Navalny after recovering from an alleged assassination attempt, and accused Moscow of threatening Ukraine by deploying tens of thousands of troops at the country’s border in recent weeks.

“It sounds like a smart move from the White House Biden,” said Tim Ash, senior analyst at BlueBay Asset Management. “Give Putin a summit at a distant point if he behaves. . . But hit it hard with short-term sanctions for SolarWinds, election meddling and Navalny and warn many others where it comes from if it misbehaves.

The ruble cut some of its initial losses and fell 1.5% to trade at 76.92 rubles to the dollar at 9 a.m. London time. Moscow’s benchmark Moex stock index fell 1.1%, while the RTS dollar-denominated market index was 2.8% lower.

The yield on the country’s benchmark 10-year bond rose 0.19 percentage points to 7.24%, although it remained below a recent high of above 7.3%. Rising yields indicate falling prices.

The share of Russian ruble-denominated treasury bills held by foreigners fell to an over-five-year low of 20.2% in March, from more than 30% a year earlier.

“Imposing draconian sanctions on Russian bonds would arguably be inconsistent with Biden’s offer of a bilateral summit to ‘normalize’ relations,” BCS Global Markets wrote in a note to clients Thursday morning. “Yet tensions between the West and Russia over Ukraine persist, with uncertainty hanging over risky trade.”

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