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Russia Is Selling Dollars because of Weak Ruble
The problems caused by the annexation of Crimea are coming home to roost in Russia as the Bank of Russia will prop up the ruble. According to Central Banking dot com,
Russia has more than quadrupled the amount of dollars it is prepared to sell to maintain the value of the ruble at a given level. It unveiled the move yesterday, hours after it surprised the markets with a 150 basis point hike to its key policy rate aimed at calming foreign exchange volatility.
The Bank of Russia will now spend up to $1.5 billion before it shifts the target band for the ruble against a basket of $0.55 and €0.45, compared with the previous trigger of $350 million. The central bank was yesterday seen spending up to $12 billion to stabilize the value of the ruble, with international investors taking fright at growing tensions between Russia and Ukraine, and a threat of international sanctions against Russia.
And Trading in Rubles instead of Dollars and Euros
Online Pravda notes that Russia will be taking other steps in response on mounting Western sanctions in the aftermath of the annexation of Crimea by the Russian Federation and continued Russian troop buildups on Ukraine’s Eastern border. Now it seems that in response to Western sanctions Russia will switch to Ruble settlements in trade with the West.
In response to economic sanctions of the West, Russia intends to switch to rubles in its deals with European partners instead of dollars and euros. State-owned export companies are said to be the first on the line to do it.
Pravda quotes Adrei Kostin, the head of the state owned VTB Bank. Kostin said that this would
“reduce dependence on the vagaries of the US and EU authorities” that continue to threaten Russia with sanctions. “It has been a month already when senior Western executives call to isolate Russia, by virtually destroying the Russian banking sector with the use of modern “nuclear weapon” in finance – dollar settlements,” said Kostin.
Coincidentally, officials with the Russian Foreign Ministry said that U.S. bank JPMorgan Chase blocked a dollar transaction from the Russian Embassy in Astana to insurance company Sogas. The transfer was blocked “under the pretext of anti-Russian sanctions.”