Russia’s Central Bank Halts Ruble Plunge as Markets Experience Freefall

On Monday, January 24, the Central bank of Russia was forced to halt purchases of foreign currency in an attempt to stop a tremendous plunge in the stock market and the value of the ruble. Monday afternoon, the Russian currency was down 2.3% against the U.S. dollar, and traded at 79.3 at one point. The Central Bank decided not to purchase foreign currency on the domestic market … from 15:00 Moscow time as part of its efforts to reduce the
 
 volatility 
of financial markets.

Russia’s Central Bank reached the decision as Russian markets were in near-freefall, with thousands of billions of dollars wiped from the value of the nation’s biggest firms amid increasing fears of a potential Russian invasion of Ukraine.

NATO allies have warned that a Russian invasion of Ukraine could occur. Countries such as the US, the UK and Australia, have begun partial evacuations of their embassies in Kyiv, the Ukrainian capital. Additionally, more Western countries have advised their citizens not to travel to Russia or Ukraine. As a result, the Russian stock market dropped 10% at one-point on Monday. The market witnessed massive losses when it traded 7% down during afternoon trading in Moscow. The equities market has now lost 30% of its value since late October when Russia’s military buildup started.

The Central Bank did not give a timeframe for when it would resume the purchases of foreign currency. The regulator said that it would be guided by the situations in the financial markets.

Tensions are increasing over Russia’s deployment of 100,000 military troops at Ukraine’s borders. The European Union in consultation with the US and other allies are putting together a series of sanctions against Moscow as they hope that such actions will help discourage Russia from any military action. Russian
 
 equities 
are expected to experience losses throughout the rest of this month because of an increase in geopolitical tensions.

Efforts to Safeguard Financial Stability

The announcement by the Central Bank of Russia comes at a time when the regulator is executing its role to maintain optimal monetary stability within the economy. Early this month, the Central Bank issued a complete ban on crypto assets, citing them as ‘volatile and widely used in illegal activities’, and a threat to citizens’ wellbeing, the country’s financial stability and the sovereignty of its monetary policy. In the recent past, the Central Bank announced plans to collect information from commercial banks concerning certain private money transfers, including details of users who traded in cryptos both in the country and abroad. Although Russia gave legal status to cryptocurrency in 2020, it has already outlawed accepting crypto coins as a means of payment in exchange for services and goods. Meanwhile, the regulator is working to launch its own digital currency (CBDC) which it regards as the future of banking in the country.

On Monday, January 24, the Central bank of Russia was forced to halt purchases of foreign currency in an attempt to stop a tremendous plunge in the stock market and the value of the ruble. Monday afternoon, the Russian currency was down 2.3% against the U.S. dollar, and traded at 79.3 at one point. The Central Bank decided not to purchase foreign currency on the domestic market … from 15:00 Moscow time as part of its efforts to reduce the
 
 volatility 
of financial markets.

Russia’s Central Bank reached the decision as Russian markets were in near-freefall, with thousands of billions of dollars wiped from the value of the nation’s biggest firms amid increasing fears of a potential Russian invasion of Ukraine.

NATO allies have warned that a Russian invasion of Ukraine could occur. Countries such as the US, the UK and Australia, have begun partial evacuations of their embassies in Kyiv, the Ukrainian capital. Additionally, more Western countries have advised their citizens not to travel to Russia or Ukraine. As a result, the Russian stock market dropped 10% at one-point on Monday. The market witnessed massive losses when it traded 7% down during afternoon trading in Moscow. The equities market has now lost 30% of its value since late October when Russia’s military buildup started.

The Central Bank did not give a timeframe for when it would resume the purchases of foreign currency. The regulator said that it would be guided by the situations in the financial markets.

Tensions are increasing over Russia’s deployment of 100,000 military troops at Ukraine’s borders. The European Union in consultation with the US and other allies are putting together a series of sanctions against Moscow as they hope that such actions will help discourage Russia from any military action. Russian
 
 equities 
are expected to experience losses throughout the rest of this month because of an increase in geopolitical tensions.

Efforts to Safeguard Financial Stability

The announcement by the Central Bank of Russia comes at a time when the regulator is executing its role to maintain optimal monetary stability within the economy. Early this month, the Central Bank issued a complete ban on crypto assets, citing them as ‘volatile and widely used in illegal activities’, and a threat to citizens’ wellbeing, the country’s financial stability and the sovereignty of its monetary policy. In the recent past, the Central Bank announced plans to collect information from commercial banks concerning certain private money transfers, including details of users who traded in cryptos both in the country and abroad. Although Russia gave legal status to cryptocurrency in 2020, it has already outlawed accepting crypto coins as a means of payment in exchange for services and goods. Meanwhile, the regulator is working to launch its own digital currency (CBDC) which it regards as the future of banking in the country.

Source: https://www.financemagnates.com/institutional-forex/russias-central-bank-halts-ruble-plunge-as-markets-experience-freefall/