The Bank of Russia has decided not to purchase foreign currency on the domestic market as part of the implementation of the fiscal rule mechanism from 15:00 Moscow time on January 24, 2022. This is stated in the press service of the bank.
“This decision was made in order to increase the predictability of the actions of the monetary authorities and reduce the volatility of financial markets. The decision to resume the purchase of foreign currency as part of the implementation of the fiscal rule mechanism will be made taking into account the actual situation in the financial markets. The Bank of Russia monitors the situation in the financial market and has enough tools to prevent threats to financial stability,” the Bank of Russia said.
Russian five-year credit default swaps hit their highest level since March 2020 at 225.7 basis points, while ruble volatility hit its highest level since November 2020. The yield on 10-year Russian OFZ bonds reached 9.76%, the highest level since the beginning of 2016.
The dollar-denominated sovereign bonds of Russia and Ukraine continued to fall, while Russian ETFs fell. The Russian dollar index RTS (.IRTS) fell by 7.8% to 1292.9 points. The ruble index of the Moscow Exchange (.IMOEX) fell by 6.1% to 3230.2 points. Shares of gas giant Gazprom and state-owned lender VTB (VTBR.MM) fell by almost 8%.
Experts attribute the fall of the stock market and the ruble exchange rate to the foreign policy situation. NATO Secretary General Jens Stoltenberg said on January 24 that Russia continues to increase its military presence near the border of Ukraine, so the alliance will put its forces on alert and increase its presence in Eastern Europe. The Russian Foreign Ministry called the information about the impending invasion of Ukraine “complete disinformation.”