The Russian ruble is now worth less than 1 cent as Russia bombs Ukrainian cities and sanctions pile up

• The ruble is now worth less than 1 cent Wednesday after Russia switched tactics to bombing Ukrainian cities.
• That's because Western nations and international investors have been quick to dump Russian investments.

Russia's currency the ruble is now worth less than 1 cent after its invading forces escalated their bombing of Ukrainian cities, and the US and its allies stepped up moves to hamstring the country's trade and financial capacities.

The ruble has been in free-fall since Russia launched its attack last week. It slid further Wednesday as Ukraine said Russian paratroopers have entered its second-largest city Kharkiv, which has been under heavy artillery bombardment.

President Joe Biden banned Russian flights from US airspace Tuesday, adding to a stream of sanctions and a boycott of investments in the country imposed by the US and its allies. Biden said Russian President Vladimir Putin had "no idea what's coming."

In the wake of the strong international response on Monday, the ruble plunged nearly 30%, trading as low as 119 per dollar. At last check Wednesday, the currency was changing hands at $0.0089, or 112 to the dollar.

The currency's crash has come as international investors and multinationals quickly distanced themselves from Russian investments, with Norway's sovereign wealth fund among them. Notably, energy giant BP said it would dump its 20% stake in Russia's Rosneft, and Shell ditched its joint ventures with Gazprom.

"There is a chance that the offshore USD/RUB is dragged a little lower as Russian exporters are forced to sell their accumulated FX earnings over coming days," ING strategists said in a daily note.

Financial markets have been hit by the impact of Russia's armed conflict with Ukraine, but Russian assets have undoubtedly been the most severely affected.

The EU, US, UK, and Canada agreed over the weekend that selected Russian banks would be removed from the SWIFT international payments system to "harm their ability to operate globally." The system enables banks around the world to execute financial transactions, so the ban means Russia is effectively blocked from international trade.

Under the restrictive measures, Russia's central bank will also be prevented from liquidating its foreign exchange assets. This move was made to prevent the bank from deploying funds in ways that could undermine the impact of the West's sanctions.

The US has also cut off Russia's two largest banks, Sberbank and VTB Bank, from direct access to the dollar, effectively forbidding American companies and individuals from dealing with them.

Russian oligarchs and others who fear being impacted by the sanctions may be fleeing to bitcoin, given its perceived insulation from the traditional financial system, according to Thomas Westwater, an analyst at DailyFX.

"Direct investments in Russian equities will be off-limits for many investors as even if not specifically prohibited, the potential sanction risk for any Russian investment will be high," Alastair George, chief investment strategist at Edison Group, said.

"We believe a significant discount for Russian assets will persist even if hostilities cease," he added. "The invasion of Ukraine has finally shifted the international consensus on the dangers of Russia's assertiveness, a trend which has been more than a decade in the making."

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