RUB: US sanctions more systemic banks – Commerzbank

US OFAC announced additional sanctions on Russia yesterday, including on systemic banks which had hitherto been exempt because of the energy trade. The Ruble exchange rate depreciated noticeably in recent days. In total, around fifty Russian banks with connections to the global financial system, and fifteen officials were added to the sanctioned list, Commerzbank’s FX analyst Tatha Ghose notes.

Ruble exchange rate depreciates noticeably

“The move may be viewed as the combination of ‘outgoing’ acts by the Biden administration to secure policies in place which are closer to its own ideology (and could have become unlikely under the next administration) – and some practical escalation in view of the military escalation taking place on the battlefield (use of new missiles).”

“At this stage, the USD/RUB and EUR/RUB exchange rate fixes do not respond much to external sanctions news, nor to domestic news about central bank rate hikes. This is because capital flows cannot occur in hard currencies in response to such events. Nevertheless, to the extent that a weak fundamental link still exists via energy and commodity trade, the Ruble exchange rate depreciated noticeably over this past week as the situation escalated.”

“This would not be so obvious by looking at the US dollar cross alone, because the dollar itself has gained so strongly against EM currencies. But it becomes obvious by looking at EUR/RUB which also has been rising since mid-November.”