Ruble Slides as Ukraine Says Rebels Start Large-Scale Offensive

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The ruble fell to a six-week low after Ukraine said rebels started a large-scale offensive in the country’s east. Stocks and bonds also declined.

Russia’s currency slid 2.3 percent to 54.0080 versus the dollar at 5:31 p.m. in Moscow, the weakest since April 21. The Micex Index of stocks lost 0.9 percent. The yield on five-year government notes rose six basis points to 10.96 percent.

Pro-Russian separatists attacked the Donetsk-region town of Maryinka, which neither side controlled, with as many as 1,000 personnel, more than 10 tanks and howitzers, Ukraine’s military said in a statement. The pickup in unrest comes more than three months after a tentative cease-fire between rebels and the government in Kiev, fueling speculation sanctions against Russia won’t be eased anytime soon.

“Any sign of an escalation of the conflict in Ukraine is going to cause concern in the Russian markets,” William Jackson, an analyst at Capital Economics Ltd. in London, said by phone on Wednesday. “It increases the likelihood that sanctions may be renewed or extended. It’s worth also bearing in mind that oil prices have fallen today, which has put pressure on the ruble.”

Even after rallying 12 percent this year, the ruble remains 34 percent weaker since Russia’s incursion into Crimea in March 2014. The U.S. and European Union penalties that followed blocked companies from global capital markets and deepened to an economic slump along with declines in oil, the nation’s biggest export earner.

Sanctions Risk

Any military build up reduces “the likelihood of any positive changes in the existing sanctions regime,” according to Vladimir Osakovskiy, the chief economist for Russia at Bank of America Corp. in Moscow. “Our view is that sanctions will remain well in place” when the EU reviews sanctions later this month.

The ruble slid earlier as Brent crude fell as much as 2.7 percent to $63.75 a barrel. The currency tumbled 3 percent to 60.8410 against the euro.

“If both sides of the conflict officially admit that the cease-fire collapsed,” the ruble could fall toward 62 per euro, Piotr Matys, a London-based foreign-exchange strategist at Rabobank, said by e-mail.

“The ruble had a very good run, but with the pro-Russian rebels launching offensive in eastern Ukraine,” according to Matys, who ranked among the five most accurate ruble forecasters in the past four quarters, data compiled by Bloomberg show.

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