The measures taken by the United States and its allies to attack some Russian banks before the country’s invasion of Ukraine shocked Russia’s financial system on Monday, with the currency falling more than 30 percent against the dollar.
The ruble’s fall is likely to exacerbate inflation in Russia and has fueled fears of bank runs in the country. Russia’s central bank said last weekend it would support Russian financial institutions hit by sanctions and that banks could continue to transact in rubles and foreign currencies.
On Monday, the central bank took further steps, raising its key interest rate from 9.5 percent to 20 percent to try to contain the damage from the sanctions. The bank also said it would release about $7 billion in bank reserves set aside as a buffer for unsecured consumer and mortgage loans.
In another effort to bolster the ruble, Russia’s finance ministry also said on Monday it would require companies to sell 80 percent of their foreign currency holdings.
Last week, the United States, Europe and other allies took steps to exclude some Russian banks from international transactions by removing them from the SWIFT financial messaging system. At the same time, the United States and several allies announced they would intervene to prevent the Russian central bank from using its reserves to undermine sanctions.
The drop early Monday brought the ruble to record levels, trading just 120 per dollar, although the currency had recovered somewhat during afternoon trading in Asia.
A crash of the currency would increase the pain that average Russians could feel from the sanctions. Inflation would rise further and the prices of imported goods would rise.
The Russian central bank tried to calm down this weekend by saying that the banking system was stable and that it would continue to supply banks with cash to ensure normal operations. It said service would be normal and all bank cards would work.
