Will the rouble go all the way to 175-200 against the dollar? Image Credit: Bloomberg

Dubai: After the initial shock and awe of the morning, the Russian rouble managed to gain some strength to the dollar, trading now at 98 roubles to a dollar. It had been at just over 105 when the markets opened, feeling the deep dent of the various sanctions announced by the US and the EU as well as – most painfully – the cutoff from the SWIFT banking system.

“The rouble had been at 69 to the dollar at the start of February, then even with tensions brewing, was only at 76.25 on February 15,” said a Treasury analyst at LuLu Exchange. “Then, once the conflict started it shot up to 87 and – with the full weight of the sanctions – shot up to 105.”

Image Credit: Vijith Pulikkal/Gulf News

The Russian central bank has, in a defensive move, ratcheted up the interest rates, effectively putting in place capital controls. For Russia’s businesses and those dealing with them, the effect of all this will cut deeper. “On all dollar-based settlements, Russian imports will turn out to be a whole lost more expensive,” said an analyst. “Can Russian businesses afford to shell out 100 or so to a dollar?”

In line of fire

According to Ipek Ozkardeskaya, Senior Analyst at Swissquote, “The sanctions increase the risk of insolvency of big Russian banks and the risk of a bank run in Russia. Russian markets will again be under a huge selling pressure, and dollarization will be the next chapter in Russia. The Ruble has already been smashed by near 30 per cent this morning to a record low, and there are hints that this could extend to 175-200 (to a dollar) range. This means that this Ukrainian war will become hard for Russia to finance.”