How the financial market reacted to the halt in trading in the dollar and euro

RBC looked into how currency exchange in banks, exchange offices and money transfer systems has changed after new US sanctions , which disabled DOLLAR and euro trading in RUSSIA

June 13 was the first working day since the early 1990s when no dollar trading took place in Russia. But their disappearance, caused by new US sanctions against the Moscow Exchange and its structures, did not lead to a sharp fall in the ruble - moreover, it strengthened. The Central Bank, which has been preparing for such sanctions since 2022, promised to keep the exchange rate uniform and market-based and emphasized that “the yuan/ruble exchange rate will set the trajectory for other currency pairs and will become a reference point for market participants.” It is still possible to conduct transactions with the Chinese currency on the Moscow Exchange, and in the future both citizens and businesses will have to focus on its exchange rate - it is now the one that most adequately makes it clear how much the ruble is valued on the exchange. The dollar and euro rates can be found in exchange offices and bank applications, but they will differ there, and the Central Bank will publish a single value for the dollar and euro - the official rate - once a day.

RBC looked into how banks, exchange offices and money transfer systems responded to the cessation of exchange trading in American and European currencies and what Russians now need to take into account when using them.

How they sold currency in banks and exchange offices

According to data at the end of the trading day on June 11, the dollar on the Moscow Exchange cost 89.10 rubles, and the euro - 95.62 rubles. On June 12, trading was not held due to a holiday, but banks significantly adjusted exchange rates for individual clients. In exchange offices, the dollar selling rate reached 120 rubles, RBC Investments wrote. In the applications of the largest banks, it was in the range of 90–95 rubles, but, due to the fact that most of these banks are under sanctions, it is impossible to withdraw the purchased currency from their accounts.

On the morning of June 13, before the start of foreign exchange trading under the new rules, the dollar selling rate in the applications of Sberbank, VTB, Alfa Bank and T-Bank (formerly Tinkoff) was in the range of 90.26–91.6 rubles.

In exchange offices in Moscow, according to the Banki.ru service, you could buy a dollar for 120 rubles. at Primorye Bank and Expobank, more than 100 rubles. - in Sinara Bank, Uralsib, Ak Bars and Zenit. By 14:30 Moscow time, the average price at which credit institutions were willing to sell cash dollars to individuals was 95.43 rubles. (45 banks were included in the Banki.ru statistics), the average purchase rate is 88.02 rubles. Thus, the average spread (the difference between the sale price and the purchase price. -) reached 7.41 rubles. Banks offered euro cash at an average rate of 102.99 rubles, the average purchase rate was 95.19 rubles, and the average spread on the market was 7.8 rubles. By 17:30 Moscow time, most banks, whose data is included in Banki.ru statistics, updated information on exchange rates. The average price at which market participants sold cash dollars fell to 94.9 rubles, and the currency spread decreased to 6.71 rubles. By the same hour, the average rate at which banks sold euro cash dropped to 102.77 rubles, the average difference in exchange transactions with the European currency decreased to 7.13 rubles.

If previously the treasuries of banks relied on exchange trading to determine internal exchange rates offered to clients, now they focus on over-the-counter trading, explains the chief economist of T-Investments (formerly Tinkoff Investments) Sofya Donets: “The rate will develop over the course of over-the-counter trading, the factors influencing how they will proceed have not changed: it is still important how much volume comes and goes out of the country.” She recalls that back in the spring of 2022, against the backdrop of the first wave of sanctions, banks increased spreads and a similar reaction has occurred now.

“Firstly, banks can include their own conversion costs into spreads - for example, the more difficult it is to find a counterparty, the less confident they are at what rate the exchange will be, the larger the spread. Secondly, banks react to uncertainty by increasing spreads. All other things being equal, on some “smooth water” spreads should stabilize and normalize. For the dollar and euro, they may remain elevated, since the number of counterparties with which the bank could trade through the exchange will be reduced.cup . But I think that the number of players who want to “get rich” through foreign exchange transactions at an inflated rate will be small - this market remains competitive, and in addition, the Central Bank has measures and the right to regulate bank foreign exchange spreads. In 2022, the regulator, for example, gave such recommendations,” says Donets.

In addition to individuals, the demand for currency exchange transactions in banks comes from legal entity clients. If previously companies could independently conduct transactions on the stock exchange, now, most likely, they will convert currency through credit organizations, believes the chief economist of T-Investments. “I would not expect the conversion rate to deteriorate for exporters. These are large players, large clients who have long-term relationships with their banks. Banks, I believe, are interested in continuing to serve these clients on mutually acceptable terms,” concludes Donets.

How sanctions affect remittances

After the news about the introduction of sanctions against the Moscow Exchange and NCC, rates rose sharply in one of the popular money transfer systems, “Golden Crown”: the dollar reached 107 rubles, the euro – up to 116 rubles. The situation returned to normal on the afternoon of June 13. By evening, the dollar exchange rate was 95.6 rubles, the euro exchange rate was 102.8 rubles. In another popular money transfer system, Unistream, the dollar exchange rate by evening was about 95 rubles, the euro exchange rate was 103.6 rubles.

The sanctions led to a temporary halt in transfers from Russia from Kyrgyz banks. Thus, RSK Bank reported that “due to technical work,” sending and receiving money is temporarily impossible through the money transfer systems Unistream, Zolotaya Korona, Sberbank Online, etc. Mbank introduced temporary restrictions on ruble transfers due to “rate volatility and possible sharp fluctuations in the foreign exchange market.”

Users of Kazakhstani banks did not encounter any problems. For example, Freedom Finance Bank, one of the popular banks among Russians, allowed people to send money from Russia without restrictions, as well as convert dollars, euros and tenge at the market exchange rate. “Our bank accepts funds from banks that are outside the sanctions. From Tsifra Bank (KZT/USD/EUR/RUB/CNY - if available) you can send by phone number. From other banks of the Russian Federation - only through SWIFT transfer,” the support message says.

The Moscow Exchange and NCC are not directly involved in conducting settlements for businesses and citizens, however, even though the bulk of foreign exchange transactions were carried out on the over-the-counter market, the exchange rate, as an available indicator, was an important factor in the stability of settlements and comparison of rates, says managing partner of Fintech Partners Alexander Kalyakin. “The imposed sanctions increase the overall level of uncertainty, the risk of unexpected changes and the uncertainty of the application of sanctions measures. In addition, they make it difficult to convert funds sent or received,” the expert notes.

It is still quite difficult to judge how the new sanctions will affect the possibility of carrying out all transactions and their cost, while individual fluctuations in exchange rates are most likely situational, says Valery Piven, HEAD of the ACRA financial institutions ratings group. “It is not yet clear what the “depth” of the new foreign exchange market will be, how settlements will work not only for transactions with settlements today, but also all others, including how the derivatives market in which currency is the underlying asset will work. Most likely, after some time, participants in the foreign exchange market will be able to solve the problems that have arisen before them, but in the near future some instability will persist,” says Piven.

The significant increase in the exchange rate in the first hours after the announcement of sanctions can be explained by the protection of payment market participants from the risks of further deterioration of the situation, continues Kalyakin: “However, as clarifications are made, as well as actions to stabilize the market, everything quickly returns to the usual norm. After all, the main business and income is made on a basic service - settlements, and not on currency purchase/sale spreads.”

Kalyakin also explains the restrictions on transfers introduced by foreign banks due to the uncertainty of the situation, the risk of incurring losses due to sudden changes in the exchange rates of various currencies, as well as the threat of falling under secondary sanctions. In his opinion, in this case the situation should normalize within the next two to three working days. “If we talk about a longer term, the main factor in destabilizing settlements is the possibility of applying secondary sanctions against counterparties, the strength and timing of these enforcement measures. Since sanctions are constantly increasing, the forecast is not very positive,” warns Kalyakin. However, he is confident that the problems that have arisen can be solved using digital technologies, cryptocurrency, as well as settlements in national currencies during bilateral trade.