Moscow Exchange Halts Trading Euro, USD on Fresh US Sanctions

The recent escalation in the US-Russian standoff has had a major impact on the Russian financial system. This comes after the US decided to impose a new batch of sanctions on June 12, targeting the Moscow Stock Exchange, the National Clearing Center and the National Settlement Depository, key players in facilitating the trading of both the US Dollar and Euro The move has also effectively halted trading in these two currencies on the Moscow Exchange, Russia’s largest bourse.

The Central Bank of Russia promptly responded to Western measures, announcing the suspension of trading in the dollar and the euro on the national exchange as of June 13. However, the Central Bank of Russia clarified that individuals and companies can still buy and sell these two currencies through licensed Russian banks, through OTC Markets OTC transactions lack the transparency and liquidity available in exchange-based trading, making it potentially more expensive to obtain dollars and euros.

These developments come after the US Treasury Department imposed sanctions on Russia’s second largest stock exchange, the St. Petersburg Stock Exchange, in November 2023. This move significantly limited the trading of US and European securities within Russia.

The latest sanctions are tightening the US grip on the Russian financial system, aiming to limit its ability to finance the war in Ukraine by restricting access to major currencies.

The impact of these sanctions is multifaceted. While some, such as sources at a large Russian export company, claim to have alternatives such as the Chinese yuan (which currently dominates forex trading on the Moscow Stock Exchange), the suspension disrupts the well-established financial mechanisms of many companies and individuals and, in addition, is likely to face.

The ruble has increased volatility due to the lack of a central exchange for trading dollars and euros as of today and this could lead to higher exchange rates for individuals and companies seeking to purchase these currencies.

The Central Bank of Russia has been keen to prepare for such sanctions for some time, simulating various scenarios with market participants in the past. However, the full extent of the economic impact is not yet clear. As tensions rise and the war in Ukraine continues, further financial sanctions and countermeasures by Russia are a possibility.