Moscow Stock Exchange suspends trading in dollars and euros

The Moscow Stock Exchange suspended trading in dollars and euros on Thursday after being hit by US sanctions aimed at preventing Russia from waging war in Ukraine.

“Due to the introduction of restrictive measures by the United States against the Moscow Exchange Group … from June 13, 2024, trading on the markets of the Moscow Exchange will be conducted … with the exception of instruments settled in US dollars and euros,” the exchange said in a statement.

“In the face of new challenges, the Moscow Exchange will continue to provide its clients with access to all segments of the trading platform,” it said.

Later Thursday, Russia’s central bank said it would suspend morning trading on the Moscow Exchange’s foreign exchange, precious metals and derivatives markets starting Friday until further notice.

The Russian National Clearing Center, which acts as an intermediary for foreign exchange transactions on the Moscow Stock Exchange, was also affected by the US sanctions.

The US Treasury Department expanded its sanctions against Russia on Wednesday. The aim is to stop the flow of money and goods to Moscow as the country continues to wage war against neighboring Ukraine.

The sanctions targeted more than 300 companies, including in Russia and countries such as China, Turkey and the United Arab Emirates.

“Vladimir Putin has approved a series of measures to attract additional capital through the Moscow Stock Exchange, both from Russian and non-Russian persons from ‘friendly countries,'” the U.S. Treasury Department said in announcing the new sanctions.

This, it says, “creates opportunities for Russians and non-Russians to profit from the Kremlin’s war machine by investing in Russian government bonds, Russian companies and leading Russian defense companies.”

The new sanctions will come into full effect on August 13.

Companies and individuals in Russia can continue to buy and sell euros and dollars through lenders, and the Russian Central Bank assured that foreign currency deposits would not be affected.

While US sanctions against the Moscow Stock Exchange will make foreign exchange trading more difficult, experts say they will have only a limited impact on the ruble exchange rate.

“We do not expect any significant impact on the ruble-dollar exchange rate, so our forecast for the rest of the year remains in the range of 90-95 rubles/USD,” said Sofia Donets, chief economist at T-Bank Investments.

“The new sanctions package reminds us once again that the sanctions regime is constantly evolving and increasing the risks of investing in alternative currencies and jurisdictions for Russians,” she added.

Others say the ruble will face greater volatility following the US Treasury announcement.

“Sanctions will have only a secondary impact on the exchange rate, namely by making the ruble more volatile and thereby increasing either the neutral ruble rate or the equilibrium ratio between capital outflows and GDP,” wrote Alexander Isakov, Bloomberg’s chief Russian economist.

“Sanctions against the (Moscow Stock Exchange) will reduce competition in the foreign exchange market and allow banks to increase their markups to their customers,” he added.

The Moscow Stock Exchange index fell by 3.5 to 4 percent at the start of trading on Thursday morning, while the stock exchange itself fell by 15 percent.