Alexander Marrow and Mark Trevelyan – Reuters June 12, 2024
- Sanctions end dollar and euro trade on biggest bourse
- US says it’s targeting financing of war economy
- Some banks immediately jack up price of buying dollars
New U.S. sanctions against Russia have forced an immediate suspension of trading in dollars and euros on its leading financial marketplace, the Moscow Exchange.
The exchange and the central bank rushed out statements on Wednesday – a public holiday in Russia – within an hour of Washington announcing a new round of sanctions aimed at cutting the flow of money and goods to sustain Russia’s war in Ukraine.
“Due to the introduction of restrictive measures by the United States against the Moscow Exchange Group, exchange trading and settlements of deliverable instruments in U.S. dollars and euros are suspended,” the central bank said.
The move means banks, companies and investors will no longer be able to trade either currency via a central exchange, which offers advantages in terms of liquidity, clearing and oversight.
Instead, they will have to trade over-the-counter (OTC), where deals are conducted directly between two parties. The central bank said it would use OTC data to set official exchange rates.
Many Russians hold part of their savings in dollars or euros, mindful of periodic crises in recent decades when the rouble has crashed in value. The central bank reassured people that these deposits were secure.
“Companies and individuals can continue to buy and sell U.S. dollars and euros through Russian banks. All funds in U.S. dollars and euros in the accounts and deposits of citizens and companies remain safe,” it said.
One person at a large, non-sanctioned Russian commodities exporter told Reuters: “We don’t care, we have yuan. Getting dollars and euros in Russia is practically impossible.”
With Moscow pursuing closer trade and political ties with Beijing, China’s yuan has ousted the dollar to become MOEX’s most traded currency, accounting for 53.6% of all foreign currency traded in May.
Dollar-rouble trading volume on MOEX tends to be around 1 billion roubles ($11 million) a day, according to LSEG data, while euro-rouble trading hovers at around 300 million roubles daily. For yuan-rouble trading, daily volumes now regularly top 8 billion roubles.
WIDE SPREADS
On the eve of the national holiday, the rouble closed at 89.10 to the dollar and at 95.62 against the euro .
But following the sanctions news, some banks immediately jacked up their dollar rates.
Norvik Bank said it was offering to buy dollars for just 50 roubles but sell for 200 roubles, though it later adjusted the rates to 88.20/97.80. Tsifra Bank was buying dollars at 89 roubles and selling at 120.
Other major banks were quoting narrower spreads of 6-7 roubles between their buy and sell rates.
The U.S. Treasury said it was “targeting the architecture of Russia’s financial system, which has been reoriented to facilitate investment into its defence industry and acquisition of goods needed to further its aggression against Ukraine”.
Russia’s central bank has been bracing for such sanctions for around two years. In July 2022, the bank said it was modelling various sanctions scenarios with forex market participants and infrastructure organisations.
“This is bad, but expected news,” Russian broker T-Investments said on Telegram.
Forbes Russia had reported in 2022 that the central bank was discussing a mechanism for managing the rouble-dollar exchange rate should exchange trading be halted in the event of sanctions against MOEX and its National Clearing Centre, which was also hit by the new sanctions.
NERVY TRADING AHEAD
MOEX said share trading and money market trades settled in dollars and euros would also cease.
The sanctions will hit the exchange’s profits by slashing trading volumes. In May, total volume on MOEX was 126.7 trillion roubles ($1.43 trillion), up more than a third on the same month of the previous year.
In 2023, MOEX recorded net profit of 60.8 billion roubles, a year-on-year increase of 67.5%.
Yevegeny Kogan, an investment banker and professor at Russia’s Higher School of Economics, urged people against panicking.
“You know, it’s genetic for us – if we’re scared, we run to buy currency. And it doesn’t matter whether it’s 100, 120 or 150. You mustn’t rush,” he warned people on Telegram, saying things could get very serious if people ignored that advice.
“Friends, it looks like tomorrow will be a very nervy day.”
There was a joke going round recently about Ukraine which was more truth than chuckle.
A Ukrainian soldier starts praying and he asks God, “Why did you give Russia all that oil and gold and mineral wealth, but not Ukraine?
God replies, “But I did! I did give you oil and gold and mineral wealth.”
The soldier looks puzzled and asks God, “When?”
God tells him, “When you were Russia.”
So what is the real meaning behind the intended sense of “escalation” that is the essential fear porn of the article?
““You know, it’s genetic for us – if we’re scared, we run to buy currency. And it doesn’t matter whether it’s 100, 120 or 150. You mustn’t rush,” …or maybe “Don’t panic don’t panic Captain Manwaring”
Can we really trust Rothschild “Reuters”? Hmmm no. The initiate style vocabulary of fiancialese encourages pseudo intellectuals to believe they understand this kind of piece and can nod their heads in agreement. I had to look up several terms. “Bourse” means “Stock Exchange”. I always wonder whether writers deliberately construct an Aintree style race course designed to have fallers at as many fences as possible.
So there are people steered by the headline and people who may believe they understand the article and claim they see the emperor’s new clothes. I don’t, but I believe this is more important to attempt to unpack than endless articles about tanks, aeroplanes, and bombs. The latter are just toys for the boys. International banking, as far as it can be apprehended, is the axle around which everything else turns.
The essence of the “US sanctions” link seems to be:
“The sanctions target third party firms and entities, including dozens of suppliers of electronics in China, as well as those in the Middle East, Africa, Europe and the Caribbean. The action stops short of imposing secondary sanctions on banks in China and other countries where Treasury has warned that dealings with Russian entities could cut institutions off from dollar access.”
But what does this mean in practice? Non-targeting of banks never “solved” the international drug trade. There is some “tough talking” here. And maybe the apparent toughness is again the essence of the message.
Looking to the TTS article:
“’Due to the introduction of restrictive measures by the United States against the Moscow Exchange Group, exchange trading and settlements of deliverable instruments in U.S. dollars and euros are suspended,’ the central bank said.”
For one thing, we may infer Russian traders are arbitraging the fear their own profit. So we have what the US is putatively doing and what Russia is doing in response.
CAUSALITY IS ASSERTED BUT IS NOT PROVEN BETWEEN THESE TWO “CHESS MOVES”.
Two pieces of bread but no real sandwich. We are none the wiser, save the fear porn of “escalation”, and to my mind, the use of fiancialese to muddy the water.
***
I realise others may have a better handle on this. If they do then please explain it to me in simple terms. I sincerely want to learn and am happy to be shown where my analysis is
…where my analysis is incorrect.
A video from Redacted says the boycott and divestment of Israel is more damaging than they’ll ever admit.
https://www.youtube.com/watch?v=AwgvbF0H32A
why should the Ruble crash ? he is backed by russias
gold reserves + rich natural recources . so the Ruble
is more worth than the fuckdollar + the jewUSA knows
this . I would buy gold backed rubles or gold Tshernowitz .
and the other BRICS will learn very soon . other side Putin
could trade like once Hitler : Oil,Gas,Ore against BRICS
products . FUCK jewUSA ! KEEP YOUR MOUTH SHUT !
YOU ARE UPSOLUTELY IRRELEVANT IN NEW WORLD .
So THAT is why the UK markets Euro Markets and US Markets all TANKED today!! Once again these are nothing but Sanctions against the WEST by the Globalist NAZI’s and Russia will thrive just like they did when the last lot of ”sanctions” happened whilst WE in the West Froze………..The Globalist HATRED of the West and White people is becoming clearer by the day
Russia has land and humans so it does not need Boris Johnson’s permission to exist