EM-Rouble plummets to record low as Russia invades Ukraine

Russia’s rouble plunged to a record low on Thursday and emerging market stocks eyed their worst day in two years after Russian forces attacked Ukraine.

Russia fired missiles at several cities in Ukraine and landed troops on its coast, officials and media said, after President Vladimir Putin authorised what he called a special military operation in the east.

The rouble tumbled nearly 8% to a record low of 89.99 against the dollar, after the Moscow Exchange lifted a temporary trading suspension imposed earlier in the day.

Yields on the Russian 10-year benchmark bonds rose to 10.96%, the highest since early 2016.

The MSCI’s gauge for emerging market stocks was last down 3.7%, tracking its worst day since March 2020.

The rouble-denominated stock index slumped 27.3%, while the dollar-denominated tumbled over 34%. Both were set for their worst one-day percentage decline on record.

Ukraine closed its airspace to civilian flights on Thursday, citing a high risk to safety, while the Interfax news agency said Russia has suspended movement of commercial vessels in the Azov sea until further notice.

The United States and its allies will impose “severe sanctions” on Russia, US President Joe Biden said.

“History shows that military attacks like this and geopolitical events will pass eventually if there is no major global economic impact,” said Vasu Menon, executive director of investment strategy at OCBC, Singapore.

“If this is so, markets will rebound after an initial sharp drawdown. Those looking to buy on dips should buy gradually and must take a medium to long term view.”