Russia is suspending currency trading as the latest US sanctions create chaos and confusion.
.in_text_content_22 { width: 300px; height: 600px; } @media(min-width: 600px) { .in_text_content_22 { width: 580px; height: 400px; } }
The Financial Times writes about this.
The cessation of trading in dollars and euros on the Moscow Exchange following the latest US sanctions targeting the remaining links between the Russian financial system and foreign banks means that the process of determining the value of the ruble will become less transparent, which will affect its convertibility and increase costs for importers and exporters, experts write .
For banks in countries from China to Turkey that continue to do business in Russia, there is a growing risk that secondary sanctions will cut them off from the US financial system, in particular by losing access to US dollars.
Imagine a medieval city in which the central market is closed. There will still be farmers who want to sell products, and residents who want to buy, they’ll just have to meet in some corners throughout the city… This is exactly what should happen in Russia, says Janis Kluge, a senior researcher at the German Institute for International and Security Affairs.
The demand for dollars and euros in Russia will remain, but it will be more difficult for buyers and sellers of foreign currency to find each other, which will make each agreement more expensive and reduce the transparency of the Russian economy, the expert added.
The transition of all transactions in dollars and euros to the interbank market will likely lead to an increase in spreads between purchase and sale prices and increased ruble volatility.
For ordinary people, this means that transferring money out of Russia will become a little more difficult… It will also impose additional costs on Russian importers as they will have to buy foreign currency for payments, and will also hit exporters who have to convert most of their foreign earnings into rubles , says Alexandra Prokopenko, a research fellow at the Russian Carnegie Eurasian Center.
In Russia, after US sanctions imposed on the Moscow Currency Exchange, a situation has arisen where each bank can set its own dollar exchange rate. This was stated by economist, member of the economic discussion club Oleg Pendzin.
Sanctions on the Moscow Currency Exchange remove the place where the exchange rate is determined from the currency exchange mechanism. This means that every bank in Russia today can set any exchange rate. There is an official rate set by the Central Bank of Russia. But the Central Bank itself cannot make transactions without the Moscow Exchange. They do not have such an interbank foreign exchange bank market as in Ukraine, but it was centralized within the Moscow Interbank Currency Exchange. A situation has arisen in which every bank in Russia is engaged in personal exchange rate setting,” Pendzin noted.
Russian economic observer Vyacheslav Shiryaev agrees with him, saying that “the course now has nothing to do with reality.”
That is, he leaves some office and coordinates with the Kremlin… You can raise your finger up – yes, the exchange rate today is 67. Okay, people will like 67. But you won’t be able to buy dollars for 67… That is, now the exchange rate is a propaganda tool, – explains Shiryaev.
Queues for currency
In St. Petersburg, Russia, queues formed at exchangers immediately after reports of the cessation of trading in dollars and euros on the Moscow Exchange amid sanctions imposed by the United States.
Independent financial analysts in Russia predict the emergence of several dollar rates after the stop of exchange trading – the black market rate, the interbank rate, the Central Bank rate, and so on, but the main reference point, according to analysts, will be the black market or gray market rate.
Clients may not be able to buy and sell dollars and euros on the exchange. In this regard, the Central Bank of Russia may begin to determine the exchange rate for over-the-counter agreements.
At the same time, fees for storing currency may increase, and withdrawing it from Russia will become even more expensive. In fact, this is another step away from the convertibility of the ruble.
New American sanctions may force Russia to begin to focus even more on the Chinese yuan. This will be an absolute and final recognition that Russia has lost its sovereignty and has become an appendage of the Chinese economy, financial analyst Maxim Blunt noted in an interview with The Insider.
Against the backdrop of the introduction of sanctions against the Moscow Exchange, some Russian banks immediately significantly raised the dollar exchange rate. The maximum exchange rate that could be used to buy a dollar in Moscow exchange offices was 200 rubles. At the same time, some bankers were ready to buy American currency for only 50 rubles per dollar.
Source: Racurs
I am David Wyatt, a professional writer and journalist for Buna Times. I specialize in the world section of news coverage, where I bring to light stories and issues that affect us globally. As a graduate of Journalism, I have always had the passion to spread knowledge through writing.