Russian markets reeling, with ruble record low in sights

Bloomberg

Russian markets have taken historic losses this year and the message coming from traders is that more declines may be ahead for the ruble.
Options pricing suggests there’s a 50% chance the ruble will sink to a record low against the dollar within the next two months — dipping below levels from 2016 when the economy was mired in a recession. Technical analysts are also eying the same move, with a trendline of the currency pair on the verge of giving way.
“Ruble weakness will be larger than expected and it’s here to stay,” said Cristian Maggio, head of portfolio strategy at TD Securities in London.
Markets have been hit hard by escalating tensions, with the latest losses coming after President Vladimir Putin said he would recognise two Russia-backed breakaway regions of Ukraine. While asset prices rebounded as traders speculated about the possible limits of sanctions, key benchmarks are still hovering near multi-year lows.
Both the ruble and Ukrainian hryvnia rank among worst-performing currencies this year, with losses exceeding 5% against the dollar. In equities, the benchmark MOEX index has lost almost a third of its value since October.
Russia’s local-currency bonds have lost about 14% this year, the worst performer in emerging markets, according to Bloomberg indexes. The yield on Russia’s dollar
bonds due 2047 rose a fifth
day to 5.75%, a three-year high, in London, according to Bloomberg. The sharp moves have strategists questioning their forecasts. Commerzbank AG strategist Ulrich Leuchtmann says there’s a good chance the central bank could step into tame market volatility and raise interest rates.