The Pound (GBP) to Russian Ruble (RUB) exchange rate advanced to a new record high on Monday as sentiment towards the Russian currency remained under pressure as violence continues in Ukraine and as Moody’s cut Russia’s credit rating.
The GBP/RUB exchange rate is now at its highest level in more than ten years as the Russian economy continues to take a beating from sanctions imposed by the West over its interference in the Ukraine conflict.
Violence in Ukraine Continues
The Ruble fell early in the session after Russia’s foreign minister refused to accept conditions needed to lift sanctions as talks held in Italy failed to end the deadlock over a ceasefire in Ukraine. The comments spooked investors who fear that the conflict and the economic impacts will now drag on for longer.
‘We respond very simply; we shall not agree to any criteria or conditions. Russia is doing more than anyone else to resolve the crisis in Ukraine,’ said Sergei Lavrov, Russia’s foreign minister.
Russia has been told by the US and European nations that it must comply with a number of criteria before sanctions would be lifted. The fighting in eastern Ukraine continued on Sunday night after pro-government troops killed a number of pro-Russian separatist rebels. Shelling of a number of towns also continues putting the uneasy truce at risk.
‘The fact that nothing changed after the Milan talks is weighing on the market. The leaders met, talked but didn’t come to any agreements, there was no breakthrough. I don’t think sanctions will be lifted anytime soon,’ said Vadim Bit-Avragim from Moscow based Kapital Asset Management LLC.
Credit Rating Cut Hurts Ruble
The Ruble was already under pressure after credit ratings agency Moody’s Investors Services downgraded Russia’s sovereign credit level from Baa1 to Baa2 and maintains a negative outlook. Moody’s follows both Standard &Poor’s and Fitch on cutting the nation’s credit rating.
In an attempt to stop the Rubles rapid fall, the Russian Central Bank has spent up to $13 billion from its foreign reserves. The nation’s economy has also taken a pasting from tumbling oil prices and a slowdown in the commodity markets has pushed the nation closer to sliding into recession.
Russia is one of the world’s biggest exporters of oil but as the commodity’s value slid to a four-year low, it has had a huge negative impact upon the economy.
As long as the Ukraine crisis continues we can expect the Ruble to remain under pressure against most of it major peers.
