Moscow Exchange suspends trading in the dollar and euro: what will happen to the Russian ruble now?

After the imposition of US sanctions, the Moscow Exchange (Moscow Exchange) announced the suspension of trading in the dollar and euro, which caused many questions and concerns among Russian citizens and businesses. The UK, following the United States, also imposed sanctions against the Moscow Exchange.

In this article, we will consider what exactly happened, what consequences it may have for the economy and the foreign exchange market of Russia, and also try to answer the most important questions related to this situation.

What happened?

The Moscow Exchange has suspended trading in the dollar and euro in response to the sanctions imposed by the United States. The UK government has also updated the sanctions list, adding the Moscow Exchange, the National Clearing Center and the National Settlement Depository, according to a document published on the official portal. These sanctions are aimed at the Russian financial sector and include a ban on transactions with certain Russian financial institutions and assets. This is a forced measure, since under the pressure of sanctions, it becomes difficult for the exchange to conduct transactions with the currencies of countries that have imposed restrictions.

What does this mean?

The suspension of trading in the dollar and euro on the Moscow Exchange means that from tomorrow Russian citizens and companies will not be able to buy or sell these currencies through official channels on the exchange. This will create significant difficulties for those who are used to using these currencies for international settlements, savings or investments.

Will it be impossible to buy currency in Russia now?

Although trading on the Moscow Exchange has been suspended, this does not mean that the purchase of dollars and euros will become impossible. Currency can be purchased in banks, exchange offices or through other financial institutions. However, we should expect an increase in spreads (the difference between buying and selling currency) and possible currency shortages in some places.

Do you need to prepare for the collapse of the ruble?

The suspension of trading in the dollar and the euro may put pressure on the ruble, causing its weakening. This is due to the fact that the demand for foreign currency will remain high, while access to it will be limited. However, the Central Bank of Russia (CBR) can take measures to stabilize the situation in the foreign exchange market using its foreign exchange reserves and other instruments.

That is, it will now be impossible to buy dollars and euros in Russia?

No, this is not entirely true. Official trading on the Moscow Exchange has been suspended, but banks and exchange offices will continue their operations. However, the availability of currency may be limited, and buying and selling rates may become less profitable for customers.

And how did the auction take place before?

Before the imposition of sanctions and the suspension of trading, dollars and euros were freely traded on the Moscow Exchange. This allowed citizens and companies to buy and sell currency at the market rate, which was set on the basis of supply and demand. Such transactions were transparent and regulated by the state.

And what will change after the sanctions?

After the introduction of sanctions and the suspension of trading, foreign exchange transactions will become less transparent and more risky. Spreads are likely to increase, which will lead to an increase in the cost of foreign exchange transactions for citizens and businesses. It could also pave the way for illegal schemes to emerge and increase the black market in currency.

Will dollars and euros rise in price because of this?

With a high probability, yes. Restricting access to the currency will lead to an increase in its value, as demand will remain high and supply will decrease. This may lead to an increase in the exchange rate of the dollar and the euro against the ruble in the domestic market.

But the Central Bank will still somehow set the exchange rate, won't it?

Yes, the Central Bank of Russia will continue to set the official exchange rate that will be used for calculations and reporting. However, this rate may differ from the market rate, especially in conditions of limited currency supply and increased demand.

Will dollars and euros get into the country at all?

Yes, dollars and euros will continue to flow into the country, but in limited volumes. This can happen through international transactions, export earnings, and other financial transactions. However, access to them will be limited, and they may become less accessible to ordinary citizens and businesses.

Can the black market in currency flourish?

With a high degree of probability, yes. Restricting official channels for buying and selling currency can lead to the growth of the black market. On the black market, rates will be less profitable and less stable, which will create additional risks for participants in such transactions.

Now the yuan will become the main foreign currency in Russia?

The yuan has already begun to play an increasingly important role in the Russian economy, especially in light of sanctions and growing economic ties with China. In the face of restrictions on dollars and euros, the demand for the yuan may increase, which will make it more popular among Russian citizens and companies for international settlements and savings.

The suspension of trading in the dollar and euro on the Moscow Exchange is a serious event that can significantly affect the Russian foreign exchange market and the economy as a whole. In the short term, this will lead to an increase in the value of the currency, limited access to it and a possible increase in the black market. In the long term, the Russian economy will be forced to adapt to the new conditions, perhaps with a greater emphasis on the use of other currencies, such as the yuan, and the development of domestic financial instruments.