Russia’s Sovereign Default Imminent

Global rating agency Fitch has downgraded Russia from ‘B’ to ‘C’, the second rating downgrade in a week, during Tuesday. The news may propel USD/RUB towards another record high, around 129.70.

In addition to the rating cut, Fitch also mentioned, “The recent downgrade of a ‘C’ rating for Russia reflects belief that a sovereign default is imminent.”

Key Quotes

“The further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective non-payment of its sovereign debt obligations”.

“To a lesser extent, the risk of imposition of technical barriers to servicing debt, including through the direct blocking of transfer of funds, or through clearing and settlement systems, have also risen somewhat since our last review”.