Russia's rouble dived past 79 a dollar on Monday, stocks sank 7%, and emerging markets in Europe, Middle East and Africa dropped sharply as worries that Moscow could invade Ukraine gripped the West.

The rouble, which began the year at around 74 per greenback, slid almost 2% to 14-month lows and Ukraine's hryvnia moved closer to more than one-year lows, as the European Union readied "never-seen-before" sanctions and the NATO beefed up its reinforcements to eastern Europe. Dollar bonds in both countries extended declines.

Kremlin Says No Attack Planned

The Kremlin accused the West of "hysteria" and has maintained that it has no plans to attack its neighbor. But it has massed about 100,000 troops near Ukraine's borders. Many countries have begun evacuating their diplomats from Kyiv.

"What you see now is the market catching up with changing the implied expectations... you are seeing a substantially higher chance of conflict... and many investors are starting to hedge their positions," Cristian Maggio, head of strategy at TD Securities, said. "The Eastern European region remains the epicenter of the crisis. Surely you may see emerging markets in general retreat a bit."

The Belarusian rouble dropped 1.4% to hit April lows, while the Polish zloty, Czech crown and the Hungarian forint slid around 0.5% each despite a weaker euro. South Africa's rand retreated 1% from over two-month highs. Among stocks, the Russian benchmark hit over one-year lows led by energy majors, while the dollar-denominated RTS index plummetted by up to 11%.

Those in central and eastern Europe plunged between 2.3% and 3%. Turkey stocks lost 3.3%. Maggio said the increased tensions pose an upside risk to the 50 basis points hike he predicts from Bank of Russia in February.

Turkey Foresees Its Inflation Reaching 40%

The Turkish lira was kept afloat by comments from the Finance Minister who predicted inflation could rise to some 40% in the coming three months before falling, lower than 50% anticipated by economists for the first half.

In Latin America, Brazil's real and Mexico's peso lost 0.2% and 0.3%. Mexico faces risks to economic growth and potential for a credit rating downgrade in the medium term from political developments including the likely passage of a controversial energy bill, JP Morgan said in a report. Washington flagged concerns about the bill on Friday, saying it could impede investment and economic development in North America.

Officials, lawmakers and business leaders say in private they believe the initiative will be watered down, but it is unclear by how much or whether it will be enough to restore bruised investor confidence.

Key Latin American stock indexes and currencies at 1313 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1224.79 -1.57 MSCI LatAm 2208.31 -1.2 Brazil Bovespa - - Mexico IPC - - Chile IPSA 4584.29 -1.3 Argentina MerVal - - Colombia COLCAP 1523.56 -1.55 Currencies Latest Daily % change Brazil real 5.4801 -0.41 Mexico peso 20.5840 -0.65 Chile peso 800.3 -0.35 Colombia peso 3970.01 -0.44 Peru sol 3.831 0.00 Argentina peso 104.5300 -0.17 (interbank)