The ruble is getting slammed again after S&P cut Russia to junk.
The currency fell over 7% to over 68 to the dollar after the S&P cut Russia’s credit rating to BB+.
All ratings below ‘BBB-‘ are considered “junk” as they are below the lowest investment grade rating.
And earlier in the day, the ruble closed around 66.3, which was the biggest decline for the ruble in over two weeks.
The currency’s drop earlier today followed the escalation of violence in Ukraine over the weekend in the city of Mariupol.
Over the weekend when Russian-backed rebels launched an assault on the vital Ukrainian port city of Mariupol, killing 30 people and injuring 83. Following the attack, the European Union’s foreign policy chief warned of a further “grave deterioration” in EU-Russian relations.
“It was pure illusion that peace could be achieved now,” Enrique Menendez, a former advertising agency owner who now runs a humanitarian relief operation in eastern Ukraine told The New York Times. “None of the sides has yet achieved its goals. The only real surprise is that the fighting started in the winter instead of the spring.”
“Geopolitics are expected to return to the picture on the escalation in eastern Ukraine and talks in the West about new sanctions against Russia,” Vladimir Miklashevsky, an analyst at Danske Bank A/S in Helsinki, told Bloomberg by email. “Falling oil and a possible fear premium will weigh on the ruble this week.”
“What we see in Ukraine now is a full-blown war, which is a red light for investors into Russian assets,” Andrey Vashevnik, who manages $US25 million as the chief investment officer at R&B Investment Fund Ltd. in Moscow, told Bloomberg. “There’s a strong chance of an S&P downgrade to junk and that would be really painful for Russia in the long run.”
The Kremlin continues to officially maintain it has not provided troops of equipment to the pro-Russia rebels in Ukraine. Russian President Vladimir Putin said on Monday that Ukraine’s army is a NATO legion whose geopolitical aim is to constrain Russia.
Meanwhile, Barack Obama threatened to step up measures against Russia following the latest episode in Mariupol.