The Russian ruble dropped some 3% against the U.S. dollar Wednesday, dropping to a 21-month low, as further U.S. sanctions appeared at the horizon.
A draft Senate bill proposing tough new sanctions for Russia’s role in interfering in the 2016 U.S. presidential election was published by local Russian newspaper The Kommersant. The bill could include prohibiting U.S. entities from purchasing Russian debt securities and limit Russian banks’ operations in the U.S. Later in the day, the U.S. announced separate sanctions against Russia over a chemical-weapons attack.
That sent Russian assets into a downward spiral and turned the ruble
to one of the biggest losers of the session Wednesday. One U.S. dollar last bought 65.439 rubles, compared with 63.515 late Tuesday in New York, a level not seen since November 2016.
“A break of 65 sees a lot of open chart space above, with 67.53 the next level on the charts after that,” said Brad Bechtel, managing director in FX at Jefferies. “A test of that level would be important on the longer-term charts and could signify that we have indeed changed trend on this pair for the foreseeable future.”
Sanction talk has rattled the Russian currency before, and analysts expect more pain ahead, leading the ruble to weaken 13.5% against the dollar in 2018 so far, according to FactSet.
“The unpredictability of the sanctions strategy under the Trump administration will keep the risk premium on Russian sovereign debt elevated, with its level far above that justified by fundamentals, thereby making Russian assets more attractive,” wrote Oxford Economics senior economist Maya Senussi.
“U.S. foreign policy vis-à-vis Russia has become more erratic with frequent backtracking,” Senussi added. But “a ban on trading or holding Russian debt has, on a number of occasions, been referred to as ‘too risky’ by the U.S. Treasury Department, making it an unlikely but not an impossible step.”
Also Wednesday, NBC reported the Trump administration signed off on sanctions against Russia to punish it for using a chemical weapon against former Russian intelligence officer Sergei Skripal and his daughter in the U.K. Those sanctions are to take effect around Aug. 22, the State Department said in a statement.
The iShares MSCI Russia ETF
was down 3.9% on Wednesday, while the VanEck Vectors Russia ETF
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