Russia shuts down dollar and euro trading after sweeping US sanctions take aim at Moscow's financial lifelines

The Wednesday party took place in Moscow.Getty Images

• Russia's Moscow Exchange halted dollar and euro trading on Thursday.

• That's after the US announced a broad sanctions package, which included the central exchange.

• Although Russians can still buy dollars over-the-counter, this will make exchange rates pricier.

Russia's central exchange has barred dollar and euro trading, spelling an end to a market that's been open since the Cold War.

Trades were halted Thursday on the Moscow Exchange after it became one of many targets of an expansive new US sanctions package. Also targeted were Russia's National Clearing Center and the National Settlement Depository, which similarly facilitate the dollar's exchange.

The latest sanctions are part of a US effort to sever Russia from foreign financial support, taking aim at virtually any global lender that transacts with Moscow. Restrictions were also placed on Russian stock exchanges to stop investors from profiting on the war in Ukraine.

According to the Financial Times, Moex' resulting dollar restriction caused the greenback's rate to spike among local banks. Where the central exchange offered the US currency at under 90 rubles, some lenders have now sold it for 120-200 rubles.

The spread between buying and selling also ballooned, more than doubling from pre-sanction levels at Russia's main state lender, Sberbank.

Meanwhile, some lenders have stopped selling greenbacks altogether, and Russians were lining up at one lender that still offers the service, Bloomberg said, citing local media.

While over-the-counter transactions would remain available, that will still likely lead to higher costs for Russian consumers. Both importers and exporters involved in the Russian market can expect higher prices.

Russia's relationship with foreign currencies has already proven volatile, given that sanctions have been an ongoing headwind since 2022.

Moscow has instead found support in China's currency and has grown significantly closer to Beijing recently. Last month, the yuan made up over half of foreign currency trades in Russia, the FT reported.

But new US sanctions could impact yuan transactions, as Chinese lenders may feel dissuaded from dealing with Russian banks.

That's already been the case this year, as Chinese dealers grew anxious about losing access to the dollar.

Read the original article on Business Insider