The ruble falls to a record against the dollar

Steps by the United States and its allies to target some Russian banks because of its invasion of Ukraine hit Russia’s financial system on Monday, with the country’s currency falling more. 30% against the dollar.

A devaluation of the ruble could exacerbate inflation in Russia, and it raises concerns about bank runs in the country. Over the weekend, Russia’s central bank said it would support sanctioned Russian financial institutions and that banks would continue to be able to conduct transactions in rubles and foreign currencies.

On Monday, the central bank took further steps, raising its key interest rate to 20% from 9.5% to try to control damage from sanctions. The bank also said it would free up about $7 billion in bank reserves that had been set aside as buffers for unsecured mortgages and consumer loans.

In another attempt to support the ruble, the Russian Ministry of Finance also said second that it would require companies to sell 80% of their foreign currency holdings.

Last week, the United States, Europe and other allies took steps to exclude some Russian banks from international transactions by removing them from the SWIFT financial messaging system. At the same time, the US and some of its allies vowed to prevent Russia’s central bank from deploying reserves to circumvent sanctions.

Early Monday’s drop put the ruble at a record, trading as low as $120 a dollar, although the currency has recovered somewhat in afternoon trading in Asia.

A currency collapse would add to the pain that average Russians might feel from sanctions. Inflation will be pushed higher and the price of imported goods will increase.

Russia’s central bank tried to appear calm over the weekend, saying the banking system was stable and would continue to provide cash to banks to ensure normal operations. It says services will be normal and all bank cards will work. The ruble falls to a record against the dollar

Fry Electronics Team

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