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Russia ETFs Retreat as U.S. Imposes New Sanctions

This article was originally published on ETFTrends.com.

While the rest of the emerging markets were strengthening, Russia stocks and country-specific ETFs were among the worst performers Wednesday as the ruble weakened toward its lowest in over two years in response to more U.S. sanctions.

On Wednesday, the VanEck Vectors Russia ETF (RSX) fell 1.9% and iShares MSCI Russia Capped ETF (ERUS) dropped 1.9%.

Pressuring Russian markets, the Trump administration imposed new sanctions on Russia in response to allegations of election-tampering, cyberattacks and other activities, the Wall Street Journal reports.

“Though Russia’s malign activities continue, we believe its adventurism undoubtedly has been checked by the knowledge that we can bring much more economic pain to bear,” Sigal Mandelker, Treasury undersecretary of terrorism and financial intelligence, told the Senate. “We will not hesitate to do so if its conduct does not demonstrably and significantly change.”

The U.S. Treasury Department also blacklisted several firms and individuals it accused of violating bans on energy trades with North Korea and breaking U.S. laws against cooperating with Russia's Federal Security Service.

Ruble Currency Depreciates Against U.S. Dollar

The increased sanctions dragged on the ruble currency, which has depreciated 8% against the U.S. dollar so far this month, Reuters reports.

“The rouble is falling helplessly, shrugging off all positive (developments),” BCS brokerage analysts said.

“The sanctions theme remains in focus for Russian market players,” Rosbank, a subsidiary of Societe Generale, said.

Related: Triple Leveraging Strength or Weakness in Russia

The weaker currency usually fuels inflation and diminishes economic activity, but it may also bolster Russia's budget revenue since the country is a major oil exporter.

Investors were also concerned that the U.S. president's former attorney may reveal additional information related to Russia's interference into the U.S. elections on Wednesday. Michael Cohen, President Donald Trump’s former personal attorney, pleaded guilty to campaign finance violations, and Cohen's lawyer claimed “knowledge on certain subjects” that would be “of interest” to Robert Mueller, a special counsel probing alleged Russian meddling into the election, the Financial Times reports.

For more news on Russia, visit our Russia category.