Forex Market: USD/RUB touches two-week lows as Russia sanction impact seen limited

The US dollar declined to a two-week low against the Russian ruble on Wednesday, as Russia pressed on with its annexation of the Crimean peninsula and amid speculation the impact of Western sanctions on the worlds biggest energy exporter, Russia, will be mild.

USD/RUB touched a daily low at 35.998 at 08:30 GMT, after which the pair consolidated at 36.064, losing 0.53% for the day. Support was likely to be received at March 5th low, 35.943, while resistance was to be met at March 18th high, 36.609.

The US and Europe have so far imposed limited sanctions against the Russian Federation, including visa restrictions and asset freezes against officials. Yesterday, Russias President Vladimir Putin officially signed an accord to start a procedure of the annexation of Ukraines breakaway Crimean region. Putin said that his country has no intention to further split Ukraine, but asserted the right to defend Russian speakers in the eastern part of Ukraine.

“The West hasn’t introduced any significant sanctions against Russia so far, the market is calm,” Sergey Vakhrameev, an analyst in Moscow at AnkorInvest LLC, said in a Bloomberg interview today.

The Micex Index of shares lost 0.8% to 1 325.67, after advancing as much as 1.2% earlier. The index plunged 7.6% last week.

The escalating tension between Russia and Ukraine has deepened the rubles decline since the start of the year and the 8.9% plunge of the currency against the US dollar makes it the second-worst performer among emerging markets tracked by Bloomberg after Argentina’s peso.

Meanwhile, market players awaited the outcome of the Federal Reserve’s two-day policy meeting, which probably will cut monthly bond buying by another $10 billion to $55 billion, as it announced stimulus reductions of the same size at its prior two meetings. The Central bank is expected to announce its decision later today.

Yesterday, data showed that building permits in the US rose more-than-expected in February, backing the case for further stimulus cuts.

Building permits for future projects rose 7.7% to a 1.018 million annualized pace last month, the most since October, data by the US Department of Commerce showed today. The number of permits filed for future projects in January was upward revised to a 0.945 million pace from a 0.937 million reported earlier. Analysts had expected a smaller gain to a 0.960 million pace in February. The increase reflected a surge in applications for apartment-building construction. However, one-family building permits declined for a third consecutive month, reaching the weakest level in a year.