Russian stock market suspends dollar trading after US sanctions

“Due to the introduction of restrictive measures by the United States against the Moscow Exchange Group, exchange trading and settlement of instruments in US dollars and euros will be suspended,” the Russian Central Bank said in a statement on Wednesday evening.

Measures that affect Russians’ ability to buy and trade foreign currencies typically provoke strong reactions in Moscow and throughout Russian society.

The exchange rate is considered a key indicator of the health of the Russian economy.

Due to the numerous periods of devaluation in the three decades since the collapse of the Soviet Union, many Russians prefer to save in Western currencies and often sell rubles in times of economic crisis.

During the Soviet Union, there was a thriving black market for currencies whose prices deviated far from the official exchange rates set by the state.

The central bank quickly tried to calm nerves on Wednesday evening.

“Companies and individuals can continue to buy and sell US dollars and euros through Russian banks. All funds held in US dollar accounts remain safe,” it said.

Outside the centralized Moscow Stock Exchange, Russians can continue to trade dollars and euros – which could limit liquidity and lead to higher volatility.

Many Russian companies and banks had already reduced their dependence on Western currencies in the two years since Moscow sent troops to Ukraine. The Chinese yuan accounted for the majority of foreign exchange trading on the Moscow Stock Exchange.

At several banks, spreads – the difference between the rate at which they buy and sell foreign currency – were between three and ten rubles on Thursday morning, a typical rate.

Some had raised their exchange rate to as much as 200 rubles per dollar immediately after the sanctions were imposed.

The Russian central bank had set the exchange rate at 89 rubles per dollar on Wednesday before the sanctions were announced.

Moscow has promised a response to the US sanctions, but has not given any concrete details.

bur/lth