New US sanctions against Russia force the end of dollar and euro trading on the Moscow stock exchange

New US sanctions against Russia have caused an immediate suspension of trading in dollars and euros in the country the main financial market, the Moscow Exchange.

Exchange, also known as MOEX, and Russian The central bank issued the statements on Wednesday, a public holiday in Russia, within an hour of Washington announcing a new round of sanctions aimed at cutting the flow of money and goods to support Moscow. war in Ukraine.

Due to the introduction of restrictive measures by the United States against the Moscow Exchange Group, exchange trading and settlements of deliverable instruments in dollars and euros have been suspended, the central bank said.

The move means banks, companies and investors will no longer be able to trade either currency through a central exchange, which offers advantages such as better liquidity and supervision.

Instead, they will have to trade over the counter, where deals are done directly between two parties. The central bank said it would use data from those trades to set official exchange rates.

Many Russians hold savings in dollars or euros, given the periodic crises in recent decades when the ruble has fallen in value. The central bank assured people that these deposits were safe.

Companies and individuals can continue to buy and sell US dollars and euros through Russian banks. All funds in dollars and euros in the accounts and deposits of citizens and companies remain safe, it says.

A person at a major exporter of unsanctioned Russian goods told Reuters: We don't care, we have yuan. Getting dollars and euros in Russia is practically impossible.

With Moscow pursuing closer trade and political ties with Beijing, the Chinese yuan has dethroned the dollar to become MOEX's most traded currency, accounting for 53.6% of all foreign currency traded in May.

The dollar-ruble trading volume on MOEX tends to be around 1 billion rubles ($11 million) per day, while euro ruble trading moves to around 300 million rubles ($3 million) every day. For yuan-ruble trading, daily volumes now regularly reach 8 billion rubles ($90 million).

On the eve of the national holiday, the ruble closed at 89.10 against the dollar and at 95.62 against the euro. After news of the sanctions, some banks immediately raised their dollar rates.

This is what Norvik Bank said on Wednesday offered to buy dollars for only 50 rubles, but sell for 200 rubles, although it later adjusted the rates to 88.20/97.80. Tsifra Bank bought dollars at 89 rubles and sold at 120.

The US Treasury said it was targeting the architecture of Russia's financial system, which has been reoriented to facilitate investment in its defense industry and the purchase of goods needed to further its aggression against Ukraine.

The Central Bank of Russia has been preparing for such sanctions for about two years. In July 2022, the bank said it was modeling various sanctions scenarios with foreign exchange market participants and infrastructure organizations.

This is bad news, but expected, Russian broker T-Investments said on Telegram.

Forbes Russia had reported in 2022 that the central bank was discussing a mechanism for managing the ruble-dollar exchange rate if foreign exchange trading were to be suspended in the event of sanctions against MOEX and its National Clearing Center, which was also hit by the new sanctions.

MOEX said stock trading and money market trades denominated in dollars and euros will also cease. The money market includes short-term, low-risk debt instruments such as government bonds and commercial debt.