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28 Feb, 2022 13:53

Russian Central Bank takes ruble off life support

Regulator says further interventions impossible due to EU, US sanctions over Ukraine crisis
Russian Central Bank takes ruble off life support

The Central Bank of Russia has suspended currency interventions in support of the ruble, the head of the regulator, Elvira Nabiullina, announced on Monday. According to Nabiullina, the regulator is unable to carry them out because of Russia's assets freeze by US and EU member states.

"Due to restrictions on the use of foreign exchange reserves in dollars and euros, we did not carry out any interventions today. The government has announced a decision to introduce the mandatory sale of 80% of export earnings. This measure will ensure an even supply of foreign currency on the domestic fx market to meet the needs of importers and citizens. At the same time we are taking a number of steps to limit export of capital by non-residents," said Nabiullina.

The Office of Foreign Assets Control, the US Treasury Department division responsible for sanctions enforcement, has prohibited US residents from engaging in any transactions with the Bank of Russia, the Russian Finance Ministry, and the Sovereign Wealth Fund.

"The Russia-related Sovereign Transactions Directive will disrupt Russia’s attempts to prop up its rapidly depreciating currency by restricting global supplies of the ruble and access to reserves that Russia may try to exchange to support the ruble," reads the statement published on the Treasury’s website on Monday.

To support the currency, Russia’s Ministry of Finance has ordered businesses that trade abroad to sell 80% of their foreign currency earnings and convert them to rubles.

Sanctions over the Ukraine conflict have sent the Russian currency plummeting to historic lows.

The ruble has lost about 30% of its value since the last trading day on Friday. On Monday, the Russian currency plummeted to as low as 109 rubles per dollar and to 122 rubles per euro before recovering some of the losses. The exchange rate for Tuesday, March 1 has been set at 93.5 rubles per dollar and 104.4 rubles per euro. 

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