Geopolitical degree: how the dollar and euro exchange rates have changed against the backdrop of the situation around Ukraine

On Monday, February 21, the Russian currency fell noticeably on the Moscow Exchange.

During trading, the dollar rose by 3.6% to 80.07.

The last time a similar indicator could be observed on January 26.

At the same time, the euro exchange rate rose by 3.7% and for the first time since April 2021 reached 90.79 rubles.

The official exchange rates of the Central Bank on February 22 were set at 76.77 rubles per dollar and 87.34 rubles per euro.

The Russian stock market also showed negative dynamics.

During the trading session, the Moscow exchange index fell by more than 18.8% to 2757 points, and the RTS index fell by 17% to

1152 points.

The values ​​reached were the lowest since November 2020.

At the same time, the Russian government bond index (RGBI) fell by 2.1% to 124.33 points, the lowest level since February 2016.

“The reason for the current situation in the markets was the situation around Ukraine.

The escalation of the crisis led to panic among foreign investors, who began to hastily withdraw their money from Russian assets.

Traders are afraid of further aggravation of the situation and the imposition of sanctions against Moscow by our Western partners, ”Alexander Razuvaev, member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers, explained to RT.

It should be noted that for several months now, investors have been reacting negatively to Western media reports, as well as to statements by representatives of the United States and Europe about Russia's allegedly impending "attack" on Ukraine.

A number of states threatened Moscow with restrictive measures in the event of such a development of events, however, in Russia, at various levels, they repeatedly denied the existence of any aggressive plans against Kiev.

Meanwhile, the situation in eastern Ukraine continues to deteriorate rapidly.

On February 17, the self-proclaimed republics of Donbass reported multiple shelling by the armed forces of Kiev.

As a result, the authorities of the DPR and LPR began to evacuate the civilian population and announced the mobilization of men capable of holding weapons.

On February 21, it became known that the Russian military prevented a violation of the state border by a sabotage and reconnaissance group from Ukraine.

In turn, the heads of the DPR and LPR Denis Pushilin and Leonid Pasechnik appealed to Russian President Vladimir Putin with a request to recognize the independence of the republics.

Also on Monday, the Russian leader held a meeting of the country's Security Council.

The meeting participants spoke in favor of recognizing the independence of the DNR and LNR.

Later, the head of state addressed the Russians and announced the adoption of a corresponding decision.

“I consider it necessary to make a long overdue decision to immediately recognize the independence and sovereignty of the Donetsk People’s Republic and the Luhansk People’s Republic.

I ask the Federal Assembly to support this decision, and then ratify the Treaty of Friendship and Mutual Assistance,” Putin said.

Assessment of prospects

Financial market participants reacted with caution to the news about the recognition of the DNR and LNR.

Against this background, fluctuations in stock quotes and exchange rates may continue in the near future.

Nikita Maslennikov, head of the Finance and Economics department at the Institute of Contemporary Development, shared this opinion in an interview with RT.

“After such a decision, market participants are waiting for increased sanctions risks and the subsequent increase in geopolitical tensions in general.

Most likely, we will see more negative rhetoric against Russia from the West.

This will affect the market temperature,” the expert believes.

Meanwhile, as Russian Prime Minister Mikhail Mishustin stated, the government has been preparing for the recognition of the DPR and LPR for many months.

So, according to him, all possible risks have already been worked out quite well.

“We understand the issues related to restricting, among other things, the import of high technologies and a number of other issues, and we have also formed appropriate groups in ministries and departments under the leadership of the Ministry of Finance on how to react in the event of such decisions, what decisions should be made jointly, in including the Central Bank,” the prime minister said at a meeting of the Security Council.

Note that US President Joe Biden did not rule out the possibility of imposing sanctions on Moscow earlier.

In particular, the head of the White House threatened to cut off Russian banks from dollar transactions.

At the same time, such a decision would have a negative impact on the United States and Europe, Biden admitted.

Against this background, experts interviewed by RT do not yet expect the implementation of the severe sanctions scenario.

“I am not sure that the restrictions will be so serious, even in the event of a further aggravation of the situation.

I don't think we will see Russia cut off from the SWIFT system or any trade bans.

However, it is worth noting that we have already reinsured ourselves quite well and prepared for such a development of events,” said Alexander Razuvaev.

The expert did not rule out that in the near future, depending on the further development of events, it will be possible to observe an additional reduction in the price of Russian securities and a weakening of the national currency.

At the same time, as the specialist emphasized, the growth of the dollar to 100 rubles remains unlikely.

According to Alexander Razuvaev, the currency interventions of the Central Bank can provide significant support to the ruble.

So, if necessary, the regulator can start selling foreign currency from reserves.

A similar point of view in an interview with RT was expressed by the head of the laboratory for the analysis of institutions and financial markets of the Institute for Applied Economic Research of the RANEPA Alexander Abramov.

“At the moment it is difficult to say exactly how the ruble exchange rate will change, as we see strong geopolitical fears of investors.

In any case, there are no serious macroeconomic factors yet that would cause a serious depreciation of the ruble.

If necessary, the state may ask exporters to sell more foreign currency and introduce a number of administrative measures to deter speculators,” Abramov concluded.