June 13 (Reuters) - Washington imposed new sanctions on

Wednesday on the Moscow Exchange and its clearing

agent, the National Clearing Centre (NCC), leading to an

immediate trading halt in dollars and euros on Russia's largest

bourse.

The U.S. Treasury said it was "targeting the architecture of

Russia's financial system, which has been reoriented to

facilitate investment into its defense industry and acquisition

of goods needed to further its aggression against Ukraine".

Russia shrugged off the move, pointing to the reduced role

of the dollar and euro since Moscow's February 2022 full-scale

invasion of Ukraine led to sweeping Western sanctions.

But the U.S. move took the market by surprise and it may

take days, if not weeks, for it to settle into the new reality.

TRADING HALT

The central bank said Moscow Exchange trading in dollars,

euros and Hong Kong dollars would stop. The sanctions,

particularly the inclusion of the NCC, prevent traders from

settling spot and futures contracts with dollars through MOEX

infrastructure.

"The sanctions were imposed only by the U.S., but EU

countries also observe them," the central bank said. "Therefore,

exchange trading was also stopped in the euro."

MOEX will likely face reduced trading volumes, which could

squeeze its profits. Its shares sank 15% at the market opening

in Moscow, before settling around 4.8% lower.

The fact that no clear indicator of the rouble-dollar rate

emerged at the start of the banking day suggests that Russia's

financial system was not 100% ready for this move, said Yevgeny

Nadorshin, chief economist at PF Capital.

SILVER LININGS

Crucially, around 60% of Moscow-based FX trading is now

conducted over-the-counter (OTC). The central bank said it would

calculate the official rouble rate based on OTC trading.

Since it started calculations in this way, the bank has only

observed "insignificant deviations" from the official

exchange-traded rate for the dollar and euro.

The exchange rate will remain market-based - it is only the

data used for calculating it that has changed.

Another benefit for Russia is that burgeoning trade with

China as Moscow redirects trade flows east has made the yuan the

most traded currency in Moscow, with 54% of the market in May,

up from a negligible pre-war share.

"To determine where the fair rate is, market participants

will be able to rely on the cross rate of rouble-yuan and

yuan-dollar and yuan-euro," said Alfa Capital.

ROUBLE PROSPECTS

Short-term volatility is unavoidable, but a strengthening of

the rouble is possible in the medium-term. When payment

difficulties hampered imports early this year, the rouble

gained, said Raiffeisen Bank analysts.

"Over the longer horizon, the rouble could even strengthen

further. As it becomes more difficult to withdraw foreign

currency ... this could lower demand for it," said Alfa Capital.

"Let's remember 2022: the rouble initially weakened strongly

due to market panic, but then began to strengthen."

The central bank said the rouble rate was determined by the

balance of supply and demand for foreign currency received from

foreign trade activities and did not depend on how transactions

were carried out.

Russian exporters that are obliged to sell a portion of

their foreign currency revenues as part of capital controls

supporting the rouble would continue to do so in dollars,

directly through authorised banks, the central bank said.

WIDE SPREADS, OTHER RISKS

Brokers were offering wide buy-sell spreads and many were

not conducting transactions at all, further evidence of the

market's general lack of preparedness for the sanctions.

"In the future, the difference between U.S. dollar and euro

buying and selling rates will become larger than before, however

the emergence of additional transaction costs and more complex

access to buying major world currencies will to some extent

limit domestic demand for foreign assets," said Oleg Kuzmin and

Andrei Melaschenko of Renaissance Capital.

Washington has clearly signalled its intent to clamp down on

banks in third countries that enable Russia to sustain its war

effort.

"The new restrictions increase the level of risk in terms of

possible secondary sanctions," said Alfa Bank.