The Russian currency, the ruble, lost value against the USD today after new U.S. sanctions were announced targeting the Russian Federation. Reaching a level of 67 to 1 dollar, the ruble is nearing the all-time lows against the U.S. currency hit during the Crimea crisis in 2014. Russian equity and fixed income markets were also hit.
Moscow’s dollar-denominated RTS, an index of 50 Russian stocks traded on the Moscow exchange, is down 2.14 percent, with financials and industrials hardest hit so far, both down more than 2.6 percent. Russian’s flagship airliner Aeroflot has fallen by 4 percent and state bank VTB is down by 3.9 percent. Russian banks have been listed as targets of various U.S. sanctions bills currently being floated in Congress.
The ruble-denominated benchmark MOEX was less affected, down roughly half a percentage point at time of writing. Russian sovereign dollar bonds fell across the curve, with the yield on Russia’s 10-year bond at a year-high of 8.08 percent. Bond prices move inversely to yields, reported CNBC.
It seems the second tranche of sanctions put in place by The White House could hand serious financial consequences to the Kremlin.
The Moscow Times reported on the new sanctions saying, The new sanctions come in two tranches. The first, which targets U.S. exports of sensitive national-security related goods, comes with deep exemptions and many of the items it covers have already been banned by previous restrictions. However, the second tranche, activated after 90 days if Moscow fails to provide “reliable assurances” it will no longer use chemical weapons and allow on-site inspections by the United Nations or other international observer groups, is more serious. NBC, citing U.S. officials, said the second round of sanctions could include downgrading diplomatic relations, suspending the state airline Aeroflot’s ability to fly to the United States and cutting off nearly all exports and imports.
One thing is for sure, President Trump has no problem using the full weight of American power to achieve his foreign policy goals. The Russian sanction push mirrors what POTUS has done with North Korea, China, and the coup-de-grace – Iran.
The American control of the global financial system is waning; however, Uncle Sam still has immense power in financial markets. It looks like Trump thinks the time is right to use it, all of it.
All of this is in keeping with Trump’s negotiation style of course. I don’t think you could find a better example, at least with Russia, where an American President spoke softly and used simultaneously ‘the big stick’.
With the American economy roaring, its military power being revamped, and a real leader in The White House, U.S. power projection capability around the world is becoming robust once again. Thankfully, POTUS doesn’t believe climate change is the most pressing threat facing America, he thinks its Russia, China, Iran, North Korea and unfair trade.