MOSCOW (Reuters) – New U.S. sanctions that forced Russia’s main exchange to halt trading in dollars and euros led to a series of varying prices and spreads on Thursday as over-the-counter (OTC) trading moved, cutting off access to reliable prices for the Russian were obscured. currency.
Russia’s central bank set its official ruble-dollar rate for Friday at 88.21, implying an increase of about 0.9% from the previous close. But the sanctions caused confusion in accurately determining the coin’s exact value.
In the interbank market, the ruble traded between a 10-day low of 90.25 and a nearly one-year high of 86.28, ending 0.4% higher at 88.62.
The central bank calculated its official rate based on OTC trading, instead of the previous method that mainly used transactions on the Moscow Stock Exchange, Russia’s largest financial market.
Washington’s sanctions against MOEX, and especially its clearing agent, the National Clearing Center (NCC), were expected since Russia’s large-scale invasion of Ukraine in February 2022, but this move still took the market by surprise.
The sanctions led to a suspension of trading in US dollars, euros and Hong Kong dollars on MOEX. The US said it aimed to cut off the flow of money and goods used to maintain Russia’s war in Ukraine.
MOEX is part of Russia’s critical financial infrastructure, but the latest sanctions are expected to have a limited impact on Russia’s ability to continue selling its oil and gas internationally, as Moscow already directs much of its trade flows to China and others Asian countries has shifted.
“Over the past two years, the role of the US dollar and the euro in the Russian market has continuously declined,” the central bank said on Thursday.
The yuan has overtaken the dollar to become, along with the ruble, the most traded currency in Moscow, accounting for a 54% share of the foreign exchange market in May.
The ruble held steady at 12.22 against the yuan, hitting a nearly one-year high of 11.8430 earlier in the session.
Russia’s ruble-based MOEX Russian index fell to a near six-month low in early trading before paring losses to close unchanged at 3,171.7 points. Shares in MOEX fell about 15% before falling about 3.1% lower.
VOLATILITY, WIDE SPREADS
“The sanctions against key institutions of the Russian financial sector are the most severe in the past year and a half after the introduction of the oil embargo and oil price ceiling,” said analysts at BCS World of Investments.
About 60% of currency trading between January and April took place on the OTC market, BCS said, thus providing a sufficient basis for forming the official exchange rate.
“At the same time, the lack of a single trading floor will lead to an increase in spreads on banks’ currency transactions.”
Banks, companies and investors can no longer trade both the US dollar and the euro via the central exchange, which provides benefits such as liquidity, clearing and supervision.
Instead, the opaque OTC market, where deals are made directly between two parties, will dominate.
“The new sanctions should have no impact on the ruble rate in the medium term,” said Yuri Popov, strategist at SberCIB Investment Research. “In the short term, there may be high volatility and wide spreads at exchange counters.”
Some major brokers blocked accounts in dollars, euros and Hong Kong dollars, preventing deposits and withdrawals.
Sberbank, Russia’s dominant lender, said it saw no increased demand for foreign currency at its branches and that currency rates had not changed since yesterday.
