By Andrey Ostroukh and Chiara Albanese
MOSCOW--The Russian ruble hit a new low on Friday as
geopolitical conflict in eastern Ukraine intensified with the
alleged participation of Russian troops.
Kiev said that Russian troops entered eastern regions of Ukraine
in support of pro-Russian rebels. Moscow denied the claim that
Russia now has a military presence in the neighboring country.
"Against the backdrop [of military intervention] I want to stay
away from those assets affected by the mounting geopolitical risks.
That includes the ruble," said Benoit Anne, emerging-market
strategist at Société Générale.
The ruble eased to a low of 37.07 versus the dollar, losing
around 0.7% on the day. That took the ruble below its previous
record of 37 per dollar, which it hit on the first trading day of
March after the West had threatened to punish Moscow for its
annexation of Crimea.
Analysts say the Russian unit could plumb new depths should the
crisis in Ukraine escalate further as foreign players are the main
sellers of the ruble.
In March, the Bank of Russia stepped in with higher
interventions in the foreign-exchange markets and raised interest
rates in an emergency move to stem the ruble's descent, but the
central bank isn't taking part in the market anymore.
In mid-August the bank widened the ruble exchange-rate corridor
and scrapped all interventions within it. Although the move was a
part of the central bank's longtime goal of switching to an
inflation-targeting policy, scheduled for 2015, it deprived the
ruble of any state support at times of increased pressure.
The approach of end-of-month tax payments, which prompt
export-focused companies to convert foreign currencies so they can
meet local liabilities, also plays against the ruble, which has
nearly become a free-float currency.
While the ruble is the worst performing currency against the
dollar on the day, the increasingly sour tone between Russia and
Ukraine is taking its toll on neighboring currencies as well.
The market impact on Eastern European markets began to mount
Friday, said Simon Derrick, chief market strategist at BNY
Mellon.
"The Polish zloty lost 0.8% against the dollar while central
bank Governor Marek Beka noted that the crisis would probably shave
0.2% to 0.3% off Polish (gross domestic product) growth," Mr.
Derrick said.
The zloty was trading at its weakest level against the euro in
around six months Friday, with a euro worth 4.2349 zloty.
"In a case scenario of military confrontation between Russia and
the West, all bets will be off and the euro could appreciate above
4.30 against the zloty," said Rabobank strategist Piotr Matys.
Similarly, the Hungarian forint lost around 0.8% against the
euro on similar concerns.
Finally, the Ukrainian hryvnia is trading around 13.61 against
the dollar Friday, recovering slightly from Thursday's record just
below 14.
Write to Andrey Ostroukh at andrey.ostroukh@wsj.com and Chiara
Albanese at chiara.albanese@wsj.com