Russia's credit rating is cut to junk, and the dollar hits a new high vs. the ruble

By Bill Chappell

Published March 3, 2022 at 2:17 PM EST

A woman leaves a currency exchange office in Saint Petersburg, Russia, on Wednesday. Russian authorities are scrambling to stem panic as massive sanctions over Moscow's invasion of Ukraine are delivering Russia's worst economic shocks since the fall of the Soviet Union.

The financial fallout over Russia's invasion of Ukraine struck another blow on Thursday, as Moody's Investors Service dropped its long-term debt rating for the Russian government from Baa3 to B3 — a six-notch freefall that leaves Russia's credit firmly in the "junk," or non-investment grade status.

Moody's also downgraded the Russian ruble in its short-term ratings, to "not prime."

Both the dollar and euro again hit all-time highs against the ruble on Moscow's currency market Thursday, according to Russia's state-run Tass media. The outlet reports that the dollar had risen by nearly 12% shortly before noon, local time.

Moody's said multiple factors have soured Russia's credit rating, from the raft of severe sanctions the U.S., European Union and their allies have imposed on Russia to "significant concerns around Russia's willingness to service its obligations."

By dropping Russia's rating to a B3, Moody's is placing the country in the same credit risk category that currently includes Ukraine. After Russian forces invaded Ukraine last week, the credit ratings agency said it was reviewing both countries for a potential downgrade, with no changes for Ukraine so far.

Moody's took action on Russia shortly after another ratings firm, Fitch, also sharply lowered the country's credit rating, saying international sanctions have brought "a huge shock to Russia's credit fundamentals." It also warned that further sanctions remain a distinct possibility.

Economic turmoil has kept the Moscow stock exchange closed for four consecutive days this week, as Russia's central bank grasps for ways to bring a sense of stability to a chaotic situation.

The central bank more than doubled its key interest rate to 20% on Monday, after certain banks were cut off from SWIFT, the global system that helps banks carry out secure transactions. A large chunk of Russia's international currency reserves — estimated in the hundreds of billions of dollars — has also been frozen by Western authorities.