Forex
Exclusive-Billions in dollar and euro notes reach Russia despite sanctions
By Gleb Stolyarov, Filipp Lebedev and Alexander Marrow
LONDON (Reuters) – Around $2.3 billion in dollar and euro bills have been shipped to Russia since the United States and EU banned the export of their banknotes there in March 2022 following the invasion of Ukraine, according to customs data seen by Reuters.
The previously unreported figures show Russia has managed to circumvent sanctions blocking cash imports, and suggest that dollars and euros remain useful tools for trade and travel even as Moscow strives to reduce its exposure to hard currencies.
The customs data, obtained from a commercial supplier that records and compiles the information, shows cash was transported to Russia from countries including the UAE and Turkey, which have not imposed restrictions on trade with Russia. The country of origin for more than half the total was not stated in the records.
The U.S. government in December threatened penalties for financial institutions that help Russia circumvent sanctions and has imposed sanctions on companies from third countries throughout 2023 and 2024.
has overtaken the greenback to become the most traded foreign currency in Moscow, although significant payment problems persist.
Dmitry Polevoy, head of investment at Astra Asset Management in Russia, said many Russians still wanted foreign currency in cash for trips abroad, as well as small imports and domestic savings.
“For individuals, the dollar is still a reliable currency,” he told Reuters.
Russia’s central bank and the United States’ sanctions authority, the Office of Foreign Assets Control (OFAC), did not respond to requests for comment.
Russia started labelling the dollar and euro as “toxic” in 2022 as sweeping sanctions cut its access to the global financial system, hampering payments and trade. Around $300 billion of the Bank of Russia’s foreign reserves in Europe have been frozen.
A European Commission spokesperson said it could not comment on individual cases of sanctions application. The spokesperson said the European Union engages with third countries when it suspects that sanctions are being circumvented.
The customs records cover March 2022 to December 2023 and Reuters could not access more recent data.
The documents showed a surge in cash imports just prior to the invasion. Between November 2021 and February 2022, $18.9 billion in dollar and euro banknotes entered Russia, compared with just $17 million in the previous four months.
Daniel Pickard, International Trade & National Security Practice Group Leader at U.S. law firm Buchanan Ingersoll & Rooney, said the pre-invasion spike in shipments suggested some Russians wanted to insulate themselves against possible sanctions.
“While the U.S. and its allies have learned the importance of collective action in maximizing economic consequences, Russia has been learning how to avoid and mitigate those same consequences,” Pickard said. He added that the data almost certainly understated actual currency flows.
LIMITED OUTFLOWS
Russia’s central bank quickly curtailed individuals’ foreign currency cash withdrawals following the invasion of Ukraine, in a bid to support the weakening rouble.
According to the data, just $98 million in dollar and euro banknotes left Russia between February 2022 and end-2023.
Foreign currency inflows, by contrast, were far higher. The largest single declarant of foreign currency was a little-known company, Aero-Trade, that offers duty-free shopping services in airports and aboard flights. It declared around $1.5 billion in bills during that period.
Aero-Trade registered 73 shipments of 20 million dollars or euros each, all of which were cleared at Moscow’s Domodedovo airport, an international hub near the company’s headquarters. The shipments were described in customs declarations as exchange or revenue from onboard trade.
In most cases, Aero-Trade was only listed as declarant, the entity that prepares and submits customs documentation. Reuters could not identify Aero-Trade’s clients and was unable to determine the source or destination of the cash.
Aero-Trade owner Artem Martynyuk told Reuters he doubted the authenticity of the customs records. He declined to comment further. The company said in a statement that “Aero-Trade is not engaged in the supply of hard currency to Russia”.
According to the customs records, one shipment of 20 million euros handled by Aero-Trade was imported in February last year by Yves Rocher Vostok, a subsidiary of French cosmetics group Yves Rocher, which still operates dozens of stores in Russia. No country of origin or supplier name was listed in the data.
Groupe Rocher, the parent company in France, said neither the group nor Yves Rocher Vostok had ever had any link with Aero-Trade or requested the transfer in question.
“Yves Rocher Vostok, like all Groupe Rocher entities, complies by the law,” a spokesperson for the group said. “It has never tried and will never try to bypass the sanctions on dollar and euro banknotes imports into Russia.”
GOLD, ARMS, BANKING
More than a quarter of the $2.27 billion in banknotes was imported by banks, much of it in payment for precious metals, according to the customs records and a person familiar with the transactions.
Several Russian banks received cash worth $580 million from abroad between March 2022 and December 2023 and exported roughly equivalent amounts of precious metals. In many cases, the gold or silver shipments went to the companies that supplied banknotes, the records showed.
For instance, Russian lender Vitabank imported $64.8 million in banknotes from Turkish gold trading firm Demas Kuyumculuk in 2022 and 2023. During the same period, Vitabank exported $59.5 million in gold and silver to the Turkish company.
A person familiar with Demas’ operations confirmed the company took part in a series of cash-for-gold transactions involving Vitabank and two other Russian lenders between March 2022 and September 2023.
The person said having banknotes delivered from the UAE to Russia was the only solution Demas found to complete long-term contracts signed before Western sanctions took effect with Russian gold suppliers, while still complying with Turkish and international regulations related to cross-border payments.
With sanctions effectively cutting Russia off from the Western financial system, settling bills with traditional wire transfer was no longer possible, the person said.
Reneging on existing agreements would have exposed Demas to financial penalties and reputational risks, the person said. The Turkish gold trader never did business with entities under Western sanctions, and strictly follows all national and international compliance procedures, the person added.
In the third quarter of last year, once all pre-war contracts with Russian companies were completed, Demas ended the two-way trades, the person said.
Vitabank, the UAE and the Turkish presidency’s communications directorate did not respond to Reuters’ requests for comment.
Among other major cash importers were entities controlled by Rostec, the state-owned military-industrial conglomerate, the documents showed.
Rostec, which has been under U.S. sanctions since 2014, did not respond to Reuters’ questions about the cash payments it received.
By Chuck Mikolajczak
NEW YORK (Reuters) -The euro slumped to a two-year low while the dollar gained on Friday after gauges of business activity were released in each region, while bitcoin again hit a record high as it continued its march toward the $100,000 mark.
HCOB’s preliminary composite euro zone Purchasing Managers’ Index, compiled by S&P Global, sank to a 10-month low of 48.1 in November, below the 50 level that marks expansion from contraction, and the 50.0 estimate.
In addition, Britain’s PMI fell to 49.9 in November, from 51.8 in October. The government’s plan to increase taxes on businesses contributed to the first contraction in private sector activity in over a year, adding to recent indications the economy was losing steam.
But in contrast, S&P Global said its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, increased to 55.3 this month, the highest level since April 2022, after a 54.1 reading in October, with the services sector proving the bulk of the increase.
“It highlights the two-track world. It’s U.S. versus the rest, but even within the U.S. it’s services versus manufacturing,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.
“How long can U.S. services make up for the drag from everything else?”
The , which measures the greenback against a basket of currencies, rose 0.41% to 107.50, with the euro down 0.54% at $1.0416 after falling to $1.0333, its lowest since Nov. 30, 2022. The greenback was on track for its third straight weekly advance.
continued its recent rally toward the $100,000 mark that has seen the cryptocurrency surge more than 40% since the U.S. election on expectations President-elect Donald Trump will loosen the regulatory environment for cryptocurrencies. Bitcoin was last up 1.44% at $98,496 after hitting a record $99,697.17.
Investors have scaled back expectations for the path of interest rate cuts from the Federal Reserve recently, currently pricing in a 52.7% chance of a 25 basis point cut at the Fed’s December meeting, down from 69.5% a month ago, according to CME’s FedWatch Tool, as they assess the impact of legislative policies by the Trump administration, such as tariffs, on the economy.
Other central banks such as the European Central Bank and the Bank of England are seen as likely to become more aggressive in cutting interest rates to buttress their economies.
Sterling weakened 0.49% to $1.2528 and was on track for its second straight weekly decline.
Some of the European Central Bank’s most influential policymakers urged the European Union to bring back long-stalled economic integration to protect its model of prosperity from a looming trade war with the United States.
Investors are waiting for Trump to name a Treasury secretary. The Wall Street Journal reported on Thursday that Trump floated the idea of appointing Kevin Warsh, a former member of the Fed’s board of governors, to the post, with the understanding that he could later become Fed chair.
Against the Japanese yen, the dollar strengthened 0.12% to 154.69. The yen had fallen below 156 per dollar last week for the first time since July, sparking the possibility that Japanese authorities may again take steps to shore it up.
Japan’s annual core inflation was 2.3% in October, keeping pressure on the central bank to raise its still-low interest rates.
Just over half of economists in a Reuters poll believe the Bank of Japan would hike in December, in part because of concerns about the depreciating yen in the midst of an improving economy.
Investing.com – The US dollar retreated Monday, handing back some of its recent gains as Donald Trump’s pick for US Treasury Secretary appeared to reassure the bond market, while the euro rebounded from the two-year low seen last week.
At 05:05 ET (10:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.6% lower to 106.892, having hit a two-year peak on Friday.
Dollar slips after Trump nomination
President-elect Donald Trump nominated fund manager Scott Bessent to be his Treasury Secretary on Friday, and this has been welcomed by the bond market, with Treasury yields falling back.
However, Bessent has also been openly in favor of a strong dollar and has supported tariffs, suggesting any pullback in the currency might be short-lived.
“We are not sure whether the recent bullish flattening in the US Treasury curve represents the market seeing him as a ‘safe pair of hands’, but he certainly does not sound like someone who will be pushing President-elect Donald Trump into weak dollar policy,” said analysts at ING, in a note.
The main economic focus this week will be Wednesday’s , the Federal Reserve’s preferred gauge of underlying inflation.
This “is expected at a little sticky 0.3% month-on-month and will keep the market guessing over whether the Fed will cut in December after all,” ING added.
Recent stubborn inflation data has seen the Fed take a cautious stance towards further interest rate cuts.
Euro rebounds from two-year low
In Europe, traded 0.6% higher to 1.0476, moving away from Friday’s two-year low of 1.0332 after European manufacturing surveys showed broad weakness last week, while the US surveys surprised on the high side.
This economic weakness has markets pricing in more aggressive easing from the European Central Bank.
“The view here remains there is no fiscal calvary coming in the eurozone and that the only way to address the current malaise is for the European Central Bank to cut rates more quickly than usual,” ING added.
The ECB has cut rates three times already this year but investors now see a 50% chance it will cut by 50 basis points on Dec. 12 instead of the usual 25 given weak growth and rising recession risks.
rose 0.4% to 1.2576, rebounding from hitting a six-week low on Friday after UK disappointed, leading the market to price in an increased chance of rate cuts from the .
That said, Bank of England Deputy Governor Clare Lombardelli said on Monday she was more worried about the risk that inflation comes in higher – not lower – than the central bank has forecast.
“I view the probabilities of downside and upside risks to inflation as broadly balanced,” Lombardelli, making her first speech since joining the BoE in July.
“But at this point I am more worried about the possible consequences if the upside materialised, as this could require a more costly monetary policy response.”
Yen helped by drop in US yields
fell 0.2% to 154.41, after a 0.4% drop in the previous week. The currency pair tends to closely follow moves in Treasury yields, and had risen sharply in the past two months as the yen weakened.
“The Japanese yen is starting to show a little strength on the crosses. Helping that has been the shift in the fiscal-monetary policy mix,” ING added. “At the margin, Japanese fiscal stimulus is encouraging the view that the Bank of Japan will hike in December after all. Nearly 15bp of a 25bp hike is now priced.”
slipped slightly to 7.2447, after rising 0.2% last week.
Investing.com– Most Asian currencies inched up on Monday, while the Japanese yen firmed against the dollar as nomination of fund manager Scott Bessent as Treasury Secretary pulled U.S. bond yields lower and put the greenback on the backfoot.
slipped to 4.351%, as President-elect Donald Trump’s nomination of Bessent saw investors positioning for a more moderate head of the Treasury, especially on the topic of trade tariffs and immigration.
The was last down 0.5% at 106.950, after hitting a two-year peak of 108.090 on Friday. also eased.
The Japanese yen’s pair was 0.4% lower on Monday after a 0.4% drop in the previous week. The currency pair tends to closely follow moves in Treasury yields, and had risen sharply in the past two months as the yen weakened.
The Chinese yuan’s pair was largely flat after rising 0.2% last week, and the Malaysia ringgit’s pair fell 0.3%. The Australian dollar’s pair rose 0.4%.
Dollar loses ground after eight straight weeks of gains
The dollar retreated on Monday after surging for the past eight weeks. Bessent’s nomination as Treasury Secretary weighed on the dollar, amid some bets that he will be a voice of moderation in Trump’s administration.
Still, the dollar’s pullback could be temporary, given that Bessent has openly favored a strong dollar and has also supported trade tariffs.
The greenback is expected to remain supported by Trump’s policies, which are seen as inflationary, and are likely to result in higher-for-longer rates in the U.S. over the coming years.
Meanwhile, market participants also pared back bets for a quarter-point rate cut from the Federal Reserve in December to 52%, compared to 72% a month ago, according .
The (PCE) index, the Fed’s preferred measure of inflation, is scheduled for release the coming Friday, and is expected to provide more cues on interest rates.
Asian economic readings in focus
Singapore dollar’s pair was largely flat after the release of monthly consumer inflation numbers. Data showed that rose 1.4% in October from a year earlier, lower than a forecast of 1.8% due to a moderation in services, electricity and gas, and other goods inflation, official data showed on Monday.
The is scheduled to meet on Wednesday and is widely expected to cut interest rates by 50 basis points again. The New Zealand dollar’s pair rose 0.4% after sliding to a one-year low on Friday.
The Indian rupee’s fell 0.2%, remaining close to recent record highs. India is set to release its third-quarter on Friday.
China will release data for November on Saturday. Before that, data from China is due on Wednesday.
South Korea’s pair was 0.2% lower. The Bank of Korea is set to decide on on Wednesday, and could potentially trim rates further.
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