The Russian ruble and the Ukrainian hryvnia, two currencies weakened by the conflict

The repercussions of the conflict between Russia and Ukraine have been felt in the economies of both countries, and their currencies have been left at the mercy of possible new sanctions against Moscow and peace negotiations.

russian currencywhich was trading around 90 rubles to a euro (80 rubles to a dollar) before February 24, when Russian troops entered Ukraine, In just a few days, it lost almost 40% of its value, reaching levels never seen before (160 rubles for one euro, 150 rubles for one dollar).

On Thursday, the Russian currency was back around 110 rubles to a euro (100 rubles to a dollar), apparently benefiting from progress in negotiations between the warring parties.

The Central Bank of RussiaAlthough it no longer has access to some of its foreign reserves, which it occasionally sells to support the ruble against Western sanctions, it has put in place serious capital controls that also appear to have had an effect.

“In the last ten years, the Central Bank has only intervened directly on a few occasions, which supports the fact that the exchange rate can stabilize at the market level. The first signs of stabilization are already appearing”commented the analyst alexander kudrinof the Russian investment group aton.

“The Russian ruble continues to strengthen after the initial impact of the sanctions”pointed at Twitter Janis Klugespecialist in Russian economics at the Berlin Research Institute SWPattributing the trend to “strict capital controls, added to significant oil and gas revenues”.

Danger of the “black market”

In Ukraine, under martial law, the Central Bank (NBU) it suspended all foreign exchange transactions and kept the February 24 rate fixed at about 32 hryvnias to a euro and 29 hryvnias to a dollar. In addition, it froze foreign exchange withdrawals and cross-border payments.

The Ukrainian Minister of Finance, Sergei Marshenkowas confident that the exchange rate “be preserved” and remembered that Ukraine receives help from international partners such as the European Unionthe world Bank and the International Monetary Fundwhich agreed to allocate US$1.4 billion to the country.

However, the actions undertaken are not without risk, stressed Ousmene Mandengguest researcher at the London School of Economics.

“The suspension of foreign exchange operations is de facto equivalent to a price freeze. If this continues, it could lead to a ‘black market’ in foreign exchange and a de facto practice of multiple currencies”estimated.

The expert advocated a “Resumption of Forex Trading” for “minimize implicit distortions”.

According Craig Erlamanalyst at oanda, “Market sentiment has been bolstered because the two sides are still talking and both sides have mentioned progress.” “I think the worst case scenarios were integrated” at foreign exchange rates, he declared.