Russia shift fx reserves from dollar
$this->bbcode_second_pass_quote('', 'R')ussia became the latest country to shift a chunk of its central bank reserves out of the dollar, further eroding the standing of the greenback as the world’s de facto reserve currency.
Sergei Ignatyev, chairman of the central bank, said 50 per cent of its forex reserves were now held in dollars, with 40 per cent in euros and the remainder in sterling. Previously it was believed that just 25-30 per cent of the reserves were in euros, with virtually all the remainder in dollars.
Moscow’s reserves have grown rapidly in tandem with high oil and gas prices. The central bank now boasts the world’s fourth-largest reserves, after China, Japan and South Korea, with its gold and forex holdings rising by 36 per cent so far this year to $247bn.
The move ties in with increasing signs that cash-laden Middle Eastern oil exporters are also looking to diversify reserves out of the dollar, following hints from the United Arab Emirates, Kuwait and Qatar.
“This is a bearish development for the dollar,” said Chris Turner, head of currency research at ING Financial Markets. “It reminds us that global surpluses are accumulating to the oil exporters, and Russia is telling us that an increasingly lower proportion of these reserves will be held in dollars. This suggests there is a trend shift away from the dollar.”
Clyde Wardle, senior emerging market currency strategist at HSBC, added: “We have heard talk that Middle Eastern countries are doing a similar thing and even some Asian countries have indicated their desire to do so.”
In a sense, Moscow’s move was unsurprising. Russia’s $71.5bn budget stabilisation fund is due to be converted from roubles to a mixture of 45 per cent dollars, 45 per cent euros and 10 per cent sterling, and the day-to-day movements of the rouble are monitored against a basket of 0.6 dollars and 0.4 euros.
Furthermore, some 39 per cent of Russia’s goods imports came from the eurozone in 2005, against just 4 per cent from the US.
The announcement failed to stop the dollar strengthening 1 per cent to $1.2661 against the euro on Thursday as interest rate differentials and geopolitical factors continued to support the greenback.
However the statement does play into a perception in the forex market that central banks, which together hold $4,250bn of reserves, are increasingly channelling fresh reserves away from the dollar to reduce potential losses if the dollar was to fall sharply as part of the process of reducing global economic imbalances.
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THE Russian Economy (merged)
THE Russian Economy (merged)
by LadyRuby » Thu 08 Jun 2006, 14:30:54
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Re: Russia shift fx reserves from dollar
by mekrob » Thu 08 Jun 2006, 15:19:30
I don't think it's so much as a shift, as a lack of building up reserves in dollars. Their total reserves have grown over the past few years due to the increase in the price of oil and those sales have mainly been to Europe so an increase in the euro should be expected (wanna keep your consumers happy). Have their dollar reserves declined? I'm thinking they've stayed the same but the percentage has gone down. An active shift would entail that they are dumping the dollar and buying other currencies. This is a little more passive I think but still dangerous to the dollar.
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Re: Russia shift fx reserves from dollar
by parsifal » Thu 08 Jun 2006, 15:28:47
Is the writing on the wall????
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Re: Russia shift fx reserves from dollar
by MrBill » Fri 09 Jun 2006, 03:19:52
$this->bbcode_second_pass_quote('parsifal', 'I')s the writing on the wall????
You would have to have be comatose not to see that every single policy maker, central banker and supranational organization has gone out of their way to draw attention to the world's current account imbalances.
It does not take much indepth analysis to connect the dots that with energy and commodity prices +300% higher than several years ago that this would result in a net wealth transfer from consumers to producers.
And you do not have to be a serious student of history to know that Russia will pursue policies that it feels are best for its own development as opposed to those that are a benefit to their traditional antagonist the USA.
Russia and the EU are one another's largest trading partners especially in energy, but also capital goods, so it make sense for the CBR to have proportionately larger euro reserves as import cover in order to reduce the mismatch in their external assets & liabilities.
I see these developments as healthy and in no way destabilizing. As the USA can cover less of its upwards to $1 trillion current account deficit abroad from foreign investors it will be forced to raise interest rates to divert more money from the real economy into domestic savings to cover their budget deficits. That will also lower global trade imbalances and reduce demand for the US dollar. But it will also lower global growth as well which will mean lower commodity and energy prices. Or at least deflate their current bubble as well as slow real appreciation in commodity and energy prices.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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Re: Russia shift fx reserves from dollar
by Zardoz » Fri 09 Jun 2006, 14:50:19
The plot thickens:
Russian moves on the dollar
* hums the old Bob Dylan tune "The Times They Are A-Changin" *
Russian moves on the dollar
* hums the old Bob Dylan tune "The Times They Are A-Changin" *
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Re: Russia shift fx reserves from dollar
by Euric » Fri 09 Jun 2006, 21:25:59
And all of this is happening despite the Iranian Bourse not in operation yet.
As some have said, this is due to Russia not selling old dollars but just the more recent accumulations being sold for euros. But when the IOB does open and the Iranians do establish a marker in euros these countries will then start to diversify of their old dollar reserves and not just the new ones.
As some have said, this is due to Russia not selling old dollars but just the more recent accumulations being sold for euros. But when the IOB does open and the Iranians do establish a marker in euros these countries will then start to diversify of their old dollar reserves and not just the new ones.
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BBC: Russian rouble faces world market
by LadyRuby » Fri 30 Jun 2006, 00:14:24
BBC: Russian rouble faces world market$this->bbcode_second_pass_quote('', 'T')his weekend Russia is lifting all currency controls. The rouble will become fully-convertible, free for you or I to buy and sell.
The Kremlin wants to establish it as a strong international currency. Supported by high oil prices, the rouble looks like being an attractive proposition. But removing currency controls also brings significant new risks for Russia.
... The rouble will be freely tradeable, joining the world of fully-fledged international currencies. ... Today, Moscow is awash with money, expensive shops and neon lights, its consumers driving a booming economy. ... "Everybody wants their salary in roubles and they came to me and say, 'Oh, maybe we change it,'" she says. "Me also, I want to have my salary in roubles now, because the dollar became cheaper. I saw it."
... It is oil and gas that's making Russia, the world's second biggest exporter, increasingly wealthy. The country has built up huge currency reserves. And to make the rouble even more attractive internationally, President Putin now has plans to charge foreign buyers of oil and gas in roubles, not dollars. "The rouble should become a more universal means for international transactions and expand its zone of influence," Mr Putin said in his recent State of the Nation address.
"We need a stock exchange where oil and gas can be traded in roubles. Our goods are being traded on world markets so why not here - in Russia?" It all means that the rouble may prove a very attractive prospect. Traders, investors, even central banks may start to buy up the currency.
Yaroslav Lissovolik, a Moscow-based economist, says it all comes down to Russia's increasing strategic important in supplying vital strategic commodities such as oil. "I think it increasingly it makes sense for the central banks of the world to start thinking about re-allocating part of their reserves from currencies such as the dollar into the rouble," he says.
So television advertisements are exhorting Russians to know their currency. But the danger is that the rouble looks cheap against other international currencies. If speculators buy it up in huge quantities, Russia may not be able to prevent the rouble strengthening too fast. The economy could overheat and Russia would face new economic problems - not from an economic in meltdown, but from a buoyant currency.
The Kremlin wants to establish it as a strong international currency. Supported by high oil prices, the rouble looks like being an attractive proposition. But removing currency controls also brings significant new risks for Russia.
... The rouble will be freely tradeable, joining the world of fully-fledged international currencies. ... Today, Moscow is awash with money, expensive shops and neon lights, its consumers driving a booming economy. ... "Everybody wants their salary in roubles and they came to me and say, 'Oh, maybe we change it,'" she says. "Me also, I want to have my salary in roubles now, because the dollar became cheaper. I saw it."
... It is oil and gas that's making Russia, the world's second biggest exporter, increasingly wealthy. The country has built up huge currency reserves. And to make the rouble even more attractive internationally, President Putin now has plans to charge foreign buyers of oil and gas in roubles, not dollars. "The rouble should become a more universal means for international transactions and expand its zone of influence," Mr Putin said in his recent State of the Nation address.
"We need a stock exchange where oil and gas can be traded in roubles. Our goods are being traded on world markets so why not here - in Russia?" It all means that the rouble may prove a very attractive prospect. Traders, investors, even central banks may start to buy up the currency.
Yaroslav Lissovolik, a Moscow-based economist, says it all comes down to Russia's increasing strategic important in supplying vital strategic commodities such as oil. "I think it increasingly it makes sense for the central banks of the world to start thinking about re-allocating part of their reserves from currencies such as the dollar into the rouble," he says.
So television advertisements are exhorting Russians to know their currency. But the danger is that the rouble looks cheap against other international currencies. If speculators buy it up in huge quantities, Russia may not be able to prevent the rouble strengthening too fast. The economy could overheat and Russia would face new economic problems - not from an economic in meltdown, but from a buoyant currency.
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Dollar - that thing not allowed to say in Russia
by LadyRuby » Fri 21 Jul 2006, 21:17:30
...at least government ministers won't be allowed to say "dollar" in Russia. Sounds very ..... Russian.
Dollar ban leaves Russian minister tongue-tied
$this->bbcode_second_pass_quote('', 'R')ussian Defence Minister Sergei Ivanov invented a new unit of currency on Friday: "That thing your are not allowed to say."
Russia's parliament is in the process of adopting a law that will fine government ministers for saying "dollar" when they could have used the word "rouble" instead.
But old habits die hard. Telling reporters about a contract to supply fighter aircraft to Venezuela, Ivanov said the deal had "a value of more than one billion of that thing that you are not allowed to say anymore."
The rouble fell into neglect during years of galloping inflation and many Russians are now more conformable quoting large sums in dollars. Parliament is introducing the ban to try to restore pride in the national currency.
Dollar ban leaves Russian minister tongue-tied
$this->bbcode_second_pass_quote('', 'R')ussian Defence Minister Sergei Ivanov invented a new unit of currency on Friday: "That thing your are not allowed to say."
Russia's parliament is in the process of adopting a law that will fine government ministers for saying "dollar" when they could have used the word "rouble" instead.
But old habits die hard. Telling reporters about a contract to supply fighter aircraft to Venezuela, Ivanov said the deal had "a value of more than one billion of that thing that you are not allowed to say anymore."
The rouble fell into neglect during years of galloping inflation and many Russians are now more conformable quoting large sums in dollars. Parliament is introducing the ban to try to restore pride in the national currency.
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