Russian rouble slumps to over two-year low on new sanctions

MOSCOW: The Russian rouble tumbled to a more than two-year low against the dollar on Friday after Washington imposed sanctions on a key bank facilitating Russia’s gas exports to Europe and as Moscow’s firing of a new hypersonic missile stoked geopolitical tensions.

Moscow fired the newly developed hypersonic ballistic missile – the Oreshnik or Hazel Tree – at a Ukrainian military facility on Thursday in response to Kyiv striking Russia with U.S.-made and British-made missiles this week for the first time after the U.S. granted its approval.

Also on Thursday, Washington imposed new sanctions on Russia’s Gazprombank that prevent the lender from handling any new energy-related transactions, potentially shutting down the only way European customers can pay for Russian gas.

By 1331, the rouble was down 1.7% at 103.02 against the dollar, earlier hitting 103.7455, its weakest mark since March 23, 2022. Trade in the rouble has become more opaque since sanctions in June abruptly halted exchange trading dollars and euros.

“The rouble is continuing to decline,” said Yevgeny Kogan, professor at Moscow’s Higher School of Economics. “The main reason is sanctions against Gazprombank, which was a backbone bank for exporters.”

Kogan said the sanctions had dramatically changed the picture for the rouble going forward, expecting the Russian currency to trade between 104-106 to the dollar by year-end, up from his previous forecast of 97-99.

The Russian rouble’s official exchange rate, set by the central bank using over-the-counter data, broke through the 100 mark against the dollar this week for the first time since October 2023, as concerns rise of further escalation in Russia’s standoff with the West.

The rouble was down 1.2% at 107.40 to the euro and had lost 0.7% against the yuan to 14.04 in Moscow Exchange trade.

Analysts widely agreed that FX volatility on Russian markets would be high in the near future, but some offered rosier forecasts for the rouble.

“The new sanctions may complicate not just settlements for exports but also for imports, which in turn will lower demand for foreign currency,” said Bank St Petersburg analysts. “As a result, we should not rule out a scenario of some strengthening of the Russian currency in the medium term.”

Brent crude oil , a global benchmark for Russia’s main export, was down 0.7% to $73.68 per barrel.