(Bloomberg) — Russian assets nosedived as military attacks across Ukraine prompted emergency central bank action and investors braced for the toughest round of Western sanctions yet, wiping out as much as $259 billion in stock-market value.
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The ruble sank to a record low, the cost of insuring Russian debt against default soared to the highest since 2009, and stocks collapsed as much as 45% — their biggest-ever retreat. The Bank of Russia said it will intervene in the foreign exchange market for the first time in years and take measures to tame volatility in financial markets.
Putin Orders Russian Attacks Across Ukraine in ‘Dark Day’
The military attack on Ukraine cast a shadow over global markets and sparked a fresh bout of risk aversion. Russian assets took the main blow after President Vladimir Putin ordered an operation to “demilitarize” Russia’s neighbor, prompting international condemnation and a U.S. threat of further “severe sanctions” on Moscow.
“The ball is now on the West’s side, we have to see how far sanctions go — whether Russia will be kept in the global financial system” said Viktor Szabo, an investor at Aberdeen Asset Management Plc. in London
The Russian central bank made no mention of raising interest rates, but said it will provide additional liquidity to banks by offering 1 trillion rubles ($11.5 billion) in an overnight repo auction. Policy makers have increased the benchmark rate by 525 basis points in the past 12 months to tame inflation.
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“Significant overshooting is possible, and the dollar-ruble at 100 certainly is well in range,” said Commerzbank AG strategist Ulrich Leuchtmann. “I don’t think that interventions will be the main instrument of choice. They can only prevent extreme overshooting. Rate hikes have to follow soon.”
Stocks and the ruble pared some losses in early afternoon trading in Moscow. After slumping as much as 9.4% the ruble was down 3.6% at 84.2250 as of 12:59 p.m. The MOEX index trimmed its…