Forex Market: USD/RUB steadies after a rebound from 5-week lows, Russia’s MOEX extends losses on renewed Ukraine invasion concerns

Following its sharpest daily increase in almost 2 years on Friday, USD/RUB was mostly steady at the start of the new week, while Russian shares plunged for a second straight session on renewed concerns over an imminent aggressive move by Russia against Ukraine.

Russia has massed over 100,000 troops near its border with Ukraine, has repeatedly dismissed any invasion plans and has said such a scenario is simply Western propaganda.

Still, the Kremlin told Russia’s RIA news agency that relations between Washington and Moscow were “lying on the floor”.

Last Thursday the exotic currency pair slipped to a 5-week low after which it gained almost 3% on Friday, as the United States advised all its citizens to leave Ukraine within 48 hours.

Over the weekend, the US said that Russia might create a surprise pretext to move against Ukraine and reaffirmed a vow to defend “every inch” of NATO territory.

The rouble-based MOEX stock index was losing 3.46% to 3,423.74 on Monday, while extending a move away from last Thursday’s 1-month high of 3,655.76.

“It makes sense to eliminate risks related to Russia to a maximum and to not take any active moves with Russian assets before the risk of a military scenario is gone,” Evgeny Suvorov, an economist at CentroCreditBank, was quoted as saying by Reuters.

However, the Russian currency seemed to have retained certain support on the back of higher oil prices and a tighter monetary policy by the Bank of Russia.

The central bank on Friday raised its benchmark interest rate by 100 basis points to 9.5%, as largely expected, in an attempt to curb persistently high inflation in the country. The Bank of Russia said it remained open to the prospect of additional interest rate increases at its next policy meetings.

Russia’s annual inflation rate is now expected to drop to the 5.0%-6.0% range this year and to return to the central bank’s inflation target in mid-2023.

Brent crude oil, a global benchmark for Russia’s main export, was retreating 0.75% on Monday to $94.23 per barrel. Earlier in the trading session the commodity rose as high as $96.05 per barrel, which has been its strongest price level since October 1st 2014 ($96.18 per barrel).

As of 9:44 GMT on Monday USD/RUB was inching up 0.01% to trade at 77.1945. Last week the Forex pair slipped as low as 74.2872, which has been its weakest level since January 3rd (74.1896). The exotic currency pair has edged down 0.16% so far in February, following a 3.65% gain in January.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 76.5348
R1 – 78.2482
R2 – 79.3060
R3 – 81.0194
R4 – 82.7329

S1 – 75.4770
S2 – 73.7636
S3 – 72.7058
S4 – 71.6481