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Ukraine conflict: Russian rouble plunges after new sanctions announced Ukraine conflict: Russia doubles interest rate after rouble slumps
(about 1 hour later)
The rouble has slumped by 30% against the US dollar, after Western nations announced new sanctions against Russia over its invasion of Ukraine. Russia has more than doubled its key interest rate after the rouble slumped by 30% against the US dollar.
The new record low for the Russian currency comes after some of the country's banks were banned from using the Swift international payment system. Bank of Russia said it raised the rate to 20% from 9.5% to help cushion the impact on prices of the rouble's slide.
It came as the UK, along with the US and EU, cut off Russia's banks from financial markets in the West.
Any UK entity is banned from undertaking transactions with Russia's central bank, its finance ministry and its wealth fund.
"The UK government will immediately take all necessary steps to bring into effect restrictions to prohibit any UK natural or legal persons from undertaking financial transactions involving the Central Bank of Russia, the Russian National Wealth Fund, and the Ministry of Finance of the Russian Federation," the government said.
The Russian currency hit a new record low after it emerged at the weekend that some of the country's banks will be banned from using the Swift international payment system.
On Sunday, Russia's central bank appealed for calm amid fears that there could be a run on the country's banks.On Sunday, Russia's central bank appealed for calm amid fears that there could be a run on the country's banks.
Growing tensions also helped push Brent crude oil above $100 (£75) a barrel.Growing tensions also helped push Brent crude oil above $100 (£75) a barrel.
The move by the European Union, United States and their allies to cut off a number of Russian banks from Swift is the harshest measure imposed to date on Moscow over the Ukraine conflict.The move by the European Union, United States and their allies to cut off a number of Russian banks from Swift is the harshest measure imposed to date on Moscow over the Ukraine conflict.
The assets of Russia's central bank will also be frozen, limiting the country's ability to access its overseas reserves.The assets of Russia's central bank will also be frozen, limiting the country's ability to access its overseas reserves.
The intention is to "further isolate Russia from the international financial system", a joint statement said.The intention is to "further isolate Russia from the international financial system", a joint statement said.
Russia is heavily reliant on the Swift system for its key oil and gas exports.Russia is heavily reliant on the Swift system for its key oil and gas exports.
"Unless the Russian central bank and Russia's largest banks - which have already been cut off from correspondent banking - find an alternative means of reaching the global financial system Russia faces Iran and North Korea-style isolation from the global economy," Ari Redbord from blockchain analytics firm TRM Labs told the BBC.
Mr Redbord was formerly at the US Treasury Department, where he was a senior advisor to the Under Secretary for Terrorism and Financial Intelligence.
Investors were also wary on Monday after Vladimir Putin ordered Russia's military to put its deterrence forces, which include nuclear weapons, on "special alert".Investors were also wary on Monday after Vladimir Putin ordered Russia's military to put its deterrence forces, which include nuclear weapons, on "special alert".
Would Putin press the nuclear button? Russia attacks Ukraine: More coverage
"Financial markets are guided by the unfolding of events in Ukraine," said Katrina Ell, an economist at Moody's Analytics in Sydney. LIVE: Latest updates from on the ground
"Announcements regarding sanctions and military action will remain market movers this week," she told the BBC. THE BASICS: Why is Putin invading Ukraine?
DNIPRO: Terrified residents jolt into action
MAPS: Tracking day four of Russia's invasion
IN DEPTH: Full coverage of the conflict
Last week, Moody's said it was reviewing Russian bonds to possibly downgrade them to '"junk", which would put Russia in a league of riskier countries that usually have to pay more to borrow. Rival credit ratings agency S&P has already lowered the country to junk status.Last week, Moody's said it was reviewing Russian bonds to possibly downgrade them to '"junk", which would put Russia in a league of riskier countries that usually have to pay more to borrow. Rival credit ratings agency S&P has already lowered the country to junk status.
Why the world is waging economic war on Russia
How badly will Russia be hit by new sanctions?
At the weekend, Russia's central bank issued an appeal for calm amid fears that the new financial sanctions could spark a run on its banks.At the weekend, Russia's central bank issued an appeal for calm amid fears that the new financial sanctions could spark a run on its banks.
It said it "has the necessary resources and tools to maintain financial stability and ensure the operational continuity of the financial sector".It said it "has the necessary resources and tools to maintain financial stability and ensure the operational continuity of the financial sector".
In the first day of trading since harsh new sanctions were imposed, the Russian rouble plunged to a new record low against the US dollar. The euro sank more than 1%, while the price of oil surged.In the first day of trading since harsh new sanctions were imposed, the Russian rouble plunged to a new record low against the US dollar. The euro sank more than 1%, while the price of oil surged.
The measures introduced this weekend increase the financial and social costs of Russia's invasion of Ukraine.The measures introduced this weekend increase the financial and social costs of Russia's invasion of Ukraine.
Russians are already waiting in long lines, worried that their bank cards may stop working or that limits will be placed on the amount of cash they can withdraw.Russians are already waiting in long lines, worried that their bank cards may stop working or that limits will be placed on the amount of cash they can withdraw.
And some of the European operations of Sberbank, the Russian state owned bank, are failing according to regulators.And some of the European operations of Sberbank, the Russian state owned bank, are failing according to regulators.
The new ban on the Central Bank of Russia's ability to use its roughly $630bn in foreign reserves undermines its ability to defend the rouble. Inflation is likely to go up because of the currency's weakness.The new ban on the Central Bank of Russia's ability to use its roughly $630bn in foreign reserves undermines its ability to defend the rouble. Inflation is likely to go up because of the currency's weakness.
This leaves the central bank with a few options, including raising interest rates or limiting the amount of money that can be brought into or out of the country.This leaves the central bank with a few options, including raising interest rates or limiting the amount of money that can be brought into or out of the country.
A run on Russian banks would see too many people trying to withdraw money. On Friday, Russia's central bank was forced to increase the amount of money it supplies to ATMs after demand for cash reached the highest level since March 2020. A run on Russian banks would see too many people trying to withdraw money.
On Friday, Russia's central bank was forced to increase the amount of money it supplies to ATMs after demand for cash reached the highest level since March 2020.
On Monday, the bank said it had ordered brokers to suspend the execution of all orders by foreign legal entities and individuals to sell Russian investments.On Monday, the bank said it had ordered brokers to suspend the execution of all orders by foreign legal entities and individuals to sell Russian investments.
It also said it had yet to decide whether to open markets other than foreign exchange and money markets on Monday.It also said it had yet to decide whether to open markets other than foreign exchange and money markets on Monday.
Videos on social media appeared to show long queues forming at cash machines and money exchanges in Moscow.Videos on social media appeared to show long queues forming at cash machines and money exchanges in Moscow.
Alexandre Moutin, head of investments at SMBC Private Wealth, believes "a bank run is already ongoing and will most likely intensify in the coming days".Alexandre Moutin, head of investments at SMBC Private Wealth, believes "a bank run is already ongoing and will most likely intensify in the coming days".
"The military conflict will last longer than Putin expected and the reaction of the West and the global community might be more harmful that he expected too," he said."The military conflict will last longer than Putin expected and the reaction of the West and the global community might be more harmful that he expected too," he said.
On Monday, the European Central Bank (ECB) said several European subsidiaries of Sberbank Russia, which is majority owned by the Russian government, are failing or likely to fail due to reputational cost of the war in Ukraine.On Monday, the European Central Bank (ECB) said several European subsidiaries of Sberbank Russia, which is majority owned by the Russian government, are failing or likely to fail due to reputational cost of the war in Ukraine.
Sberbank Europe AG, which had total assets of €13.64bn (£11.4bn; $15.2bn) at the end of last year, along with its Croatian and Slovenian units, suffered a rapid deposit outflow in recent days and is likely to fail to pay its debts or other liabilities, the ECB, which is the lenders' supervisor, said. Sberbank Europe AG, which had total assets of €13.64bn (£11.4bn) at the end of last year, along with its Croatian and Slovenian units, suffered a rapid deposit outflow in recent days and is likely to fail to pay its debts or other liabilities, the ECB, which is the lenders' supervisor, said.
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