Russia ends trade in dollars and euros after sweeping US sanctions aim at Moscow’s financial lifeline

Wednesday’s party took place in Moscow.Getty Images

• Russia’s Moscow Exchange halted dollar and euro trading on Thursday.

• This is after the US announced a broad package of sanctions, which included the central exchange.

• Although Russians can still buy dollars over the counter, this will make exchange rates more expensive.

Russia’s central exchange has banned trading in dollars and euros, signifying the end of a market that has been open since the Cold War.

Trading was halted on Thursday on the Moscow Exchange after it became one of many targets for an expansion new US sanctions package. Also targeted were Russia’s National Clearing Center and the National Settlement Depository, which similarly facilitate dollar exchange.

The latest sanctions are part of a U.S. effort to decouple Russia from foreign financial support, targeting virtually any global creditor that transacts with Moscow. Restrictions were also placed on Russian stock exchanges to prevent investors from profiting from the war in Ukraine.

According to Financial Times, the dollar restriction resulting from Moex caused the dollar rate to skyrocket among local banks. While the central exchange offered US currency for less than 90 rubles, some lenders have already sold it for 120-200 rubles.

The bid-ask spread also widened, more than doubling pre-sanctions levels at Russia’s main state lender, Sberbank.

Meanwhile, some lenders stopped selling dollars altogether, and Russians were lining up at a lender that still offers the service, Bloomberg he said, citing local media.

Although over-the-counter transactions will continue to be available, this will likely lead to higher costs for Russian consumers. Both importers and exporters involved in the Russian market can expect higher prices.

Russia’s relationship with foreign currencies has already proven volatile, as sanctions have been an ongoing obstacle since 2022.

Instead, Moscow has found support in China’s currency and has moved significantly closer to Beijing recently. Last month, the yuan accounted for more than half of foreign currency trades in Russia, the FT reported.

But the new US sanctions could have an impact on yuan transactions, as Chinese lenders may be deterred from dealing with Russian banks.

This is already was the case this year as Chinese traders grew concerned about losing access to the dollar.

Read the original article at Business Insider

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