Russia’s rouble slid on Thursday after reports that a fresh round of US sanctions against Moscow was set to be announced potentially targeting the country’s sovereign debt.
Washington is set to unveil the new measures to punish Russia for alleged meddling in US elections and hacking attacks, US media reported, citing unnamed sources. They will target several individuals and organisations and could include restrictions on trading in newly issued state debt.
The rouble dropped as much as 2.2 per cent in early trading on Thursday to about 77.5 to the US dollar, erasing gains the Russian currency posted after a Tuesday telephone call between US president Joe Biden and his counterpart Vladimir Putin, when the two leaders discussed a potential joint summit aimed at easing tensions between two countries.
A new package of US sanctions, which would add to an extensive list of restrictions first imposed in 2014 after Moscow’s annexation of Crimea, has been long expected.
The Biden administration began drawing up measures to punish Russia after US intelligence officials said a large-scale hack of at least nine federal agencies and about 100 companies, referred to as the SolarWinds hack, was “likely of Russian origin”, sources told the Financial Times in February.
The US has also condemned the recent arrest and jailing of Russian opposition activist Alexei Navalny after his recovery from a suspected assassination attempt, and accused Moscow of threatening Ukraine by deploying tens of thousands of troops to the country’s border in recent weeks.
“Looks like a clever move by the Biden White House,” said Tim Ash, senior analyst at BlueBay Asset Management. “Offer Putin a summit at some far off point if he behaves . . . But hit him hard with sanctions in the near term for SolarWinds, election meddling and Navalny and warn of lots more where this came from if he misbehaves.”
The rouble trimmed some of its initial losses and was down 1.5 per cent to trade at 76.92 roubles per dollar by 9am London time. Moscow’s benchmark Moex stock index was down 1.1 per cent, while the market’s dollar-denominated RTS index was 2.8 per cent lower.
The country’s benchmark 10-year bond yield rose 0.19 percentage points to 7.24 per cent, although it remained below a recent high above 7.3 per cent. The increase in yield points to a decline in price.
The share of Russia’s rouble-denominated Treasury bonds held by foreigners fell to a more than five-year low of 20.2 per cent in March, down from more than 30 per cent just a year earlier.
“Levying draconian sanctions on Russian bonds, arguably, would be inconsistent with Biden’s offer for a bilateral summit to ‘normalise’ relations,” BCS Global Markets wrote in a note to clients on Thursday morning. “Yet, tension between the west and Russia over Ukraine lingers, with uncertainty weighing on the risk trade.”