The Moscow Exchange has halted trading in the US dollar and euro, a significant response to the latest round of sanctions imposed by the United States aimed at further isolating Russia’s economy and limiting its financial capabilities amidst the ongoing conflict in Ukraine. This move, effective from Thursday, June 13, 2024, marks a pivotal moment in the financial repercussions of the geopolitical tensions and raises questions about the future of currency exchange in Russia and its impact on rates like the unofficial, yet often considered benchmark, 90 Dollar To Euro level in broader currency markets.
The exchange officially announced the suspension, citing the “restrictive measures by the United States against the Moscow Exchange Group.” This action means that instruments settled in U.S. dollars and euros will no longer be traded on the exchange, as stated in their official release. Despite these disruptions, the Moscow Exchange reassured clients of their commitment to maintaining access to other segments of their trading platform, emphasizing their resilience in the face of these new financial challenges.
Further complicating the financial landscape, the Russian Central Bank declared a suspension of morning trading sessions for foreign exchange, precious metals, and derivatives markets on the Moscow Exchange, starting Friday. This suspension will remain in effect until further notice, adding another layer of uncertainty to market operations. The U.S. Treasury Department’s broadened sanctions, targeting over 300 entities including those in countries like China and the UAE, are designed to tighten the financial screws on Moscow, impeding the flow of funds and resources that could support its military actions.
These sanctions are a direct consequence of what the U.S. Treasury Department described as Vladimir Putin’s efforts to attract capital through the Moscow Exchange, offering avenues for both Russian and non-Russian investors from “friendly countries” to profit from investments in Russian sovereign debt and corporations, including those linked to defense. The sanctions are slated to fully take effect on August 13, giving market participants a window to adjust to the new regulations.
While exchange trading is affected, Russians and Russian entities will still be able to transact in euros and dollars through commercial banks. The Russian Central Bank has also moved to reassure the public that foreign currency deposits held in banks remain secure and unaffected by these measures.
Experts suggest that while these sanctions will undoubtedly introduce complexities into currency transactions, their direct impact on the ruble’s exchange rate might be limited. Sofia Donets, chief economist at T-Bank Investments, forecasts the ruble-dollar exchange rate to remain within the 90-95 rubles per USD range for the remainder of the year. However, she also noted that these sanctions serve as a reminder of the evolving risks associated with investments in alternative currencies and jurisdictions for Russian investors. This situation also indirectly touches upon the 90 dollar to euro rate, as disruptions in one currency pair can create ripples across the broader foreign exchange market, potentially influencing other exchange rates and increasing market volatility.
Alexander Isakov, Bloomberg’s chief economist for Russia, anticipates increased ruble volatility due to the sanctions. He suggests that by reducing competition in the currency conversion market, banks might widen spreads for customers. This volatility could indirectly influence various currency pairs, including the dollar to euro, as market participants adjust their positions in response to the ruble’s fluctuations.
The immediate market reaction saw the Moscow Exchange index drop by 3.5-4% at the start of trading on Thursday, with shares of the exchange itself plummeting by 15%. This market response underscores the immediate impact of the sanctions and the uncertainty they inject into the Russian financial markets. While the direct focus is on dollar and euro trading in Moscow, the global financial community is watching closely to see how these measures will further shape the economic landscape and influence international currency valuations, including benchmarks around rates like 90 dollar to euro, even if indirectly.
