Rouble hits record low on slashed ratings, oil prices fan inflation fears

  • Fitch, Moody's downgrade Russian bonds to "junk"
  • Turkey's lira falls as inflation surges to 20 year high
  • Brent crude futures at highest level since May 2012

March 3 - Russia's rouble hit a new record low on Thursday, extending declines for the fourth consecutive day as ratings agencies Fitch and Moody's downgraded its sovereign bonds to "junk" status, while surging oil prices fanned worries about global inflation.

Fitch and Moody's downgraded Russia by six notches, questioning its ability to service debt as Western sanctions wreak havoc on its financial system. read more

The rouble hit a record low of 118.15 against the dollar in Moscow trading, while the interbank rate tumbled over 20%.

"The volatility is going to continue, primarily because Russian asset markets have been in global benchmarks, and they're effectively being removed from those benchmarks," said Chris Turner, global head of markets at ING.

"If there were any opportunity for foreigners to remove rouble assets, they would, which is going to mean there's a lot of downside pressure on the rouble."

Russia's financial markets have been thrown into turmoil by sanctions imposed over its invasion of Ukraine. British military intelligence said Moscow's advance on Kyiv has made scant progress and Ukrainian forces still held Kharkiv and several other cities under attack. read more

Equity index providers FTSE Russell and MSCI said they are removing Russian equities from all their indexes on Wednesday. The MSCI's index for emerging market equities (.MSCIEF) edged 0.3% higher, while its currencies counterpart (.MIEM00000CUS) was flat.

Oil prices continued their advance on Thursday, with Brent crude futures touching their highest since May 2012 amid U.S. sanctions targeting Russian refineries, disruptions to shipping and fall in U.S. crude stocks to multi-year lows.

Currencies of crude-exporting countries in Latin America including those of Brazil , , Mexico and Colombia gained on the back of sky-high commodity prices compared to currencies of oil importers such as Turkey .

The lira fell 0.8%, its fourth consecutive day of losses, as data showed Turkey's annual inflation jumped to a two-decade high in February, fuelled by a crash in the currency last year and soaring commodity prices that are expected to climb higher due to Russia's invasion of Ukraine. read more

Currencies of those in central and eastern Europe also dipped due to their proximity to the war in Ukraine. ,

South Africa's rand traded flat with traders cautious that the invasion could dampen economic growth.

For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX

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Reporting by Shreyashi Sanyal and Anisha Sircar in Bengaluru; Editing by Krishna Chandra Eluri

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