Ukraine Central Bank Freezes FX Market, Limits Cash Withdrawals; Russia Intervenes To Rescue Ruble As Credit Risk Explodes

It’s not just the energy complex that is roiling following Russia’s actions in Ukraine.

The FX and credit markets are in full turmoil in both Russia and Ukraine with both their currencies collapsing to record lows as sovereign yields explode higher.

Russia’s Ruble collapsed to 88/USD at the open and only after open intervention by Russia’s Central Bank could the currency stage a rally…

The central bank said in a statement that “to stabilise the situation on the financial market, the Bank of Russia has decided to start interventions in the foreign exchange market.”

The measures are intended to provide “additional liquidity to the banking sector” in Russia, with Western sanctions looming after the military operation announced by Russian President Vladimir Putin.

“The Bank of Russia will ensure the maintenance of financial stability and continuity of the operation of financial institutions, using all necessary tools,” it said.

The central bank added that it and other financial institutions “have clear action plans for any scenario.”

Russia holds a formidable war-chest of more than $600 billion in foreign-exchange reserves and gold that it can use in currency markets to prop up the ruble, but for now that is not enough to calm concerns in the sovereign risk market as Russian CDS has exploded higher…

Meanwhile in Ukraine, the Central bank has taken emergency measures to stem the outflows of capital. 

Governor Kyrylo Shevchenko says in statement on bank’s website that measures taken include suspension of FX market, limits on daily cash withdrawals and ban on international money transfers.

Appropriate actions are necessary to ensure the reliable and stable functioning of the country’s financial system and maximize the activities of the Armed Forces of Ukraine, as well as the smooth operation of critical infrastructure facilities.

However, Ukrainian bond prices have crashed (sending yields on the 7.253% dollar notes maturing in 2033 over 80%)…

And UAH has crashed to more than 30/USD before local trading was suspended…

“Within days or weeks capital will be flowing away from central and eastern Europe, causing a double-digit retreat on stocks,” said Adam Lukojc, head of equity investments at Warsaw-based asset manager TFI Allianz Polska SA.

For now those flows appear to be finding safe haven in precious metals…

BNP Paribas’ Ukrsibbank subsidiary has suspended operations of branches in several regions of Ukraine following adoption of martial law in the country, bank says in statement on Thursday, adding that “we work in line with recommendations of the National Bank of Ukraine.”

Tyler Durden
Thu, 02/24/2022 – 06:06

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