Why dollar lost its spot in Russia's foreign-exchange reserves?

Why dollar lost its spot in Russia's foreign-exchange reserves?

Russian Central Bank published information on geographical and monetary structure of its foreign-exchange reserves with a six-month lag.

It turned out that at the end of June of last year, American dollar lost its first place in Russian foreign-exchange reserves: its share dropped by a half to a historic low of 21.9% compared to 43.7% at the end of March of last year, RBC writes.

Judging by the information provided by Central Bank, in the second quarter of last year, the Bank of Russia reduced reserves in dollars by about $100 billion (from $201 billion to $100 billion). Reserves in euros and Chinese yuan increased by $44 billion (from $102 billion to $147 billion and from $23 billion to $67 billion respectively). In addition, reserves in Japanese yen grew by $20.6 billion.

In other words, in the second quarter of last year the Central Bank transferred about $100 billion from US dollars to euros, yuan and yen.

By the third quarter of last year, euro accounted for 32% of Russia's foreign-exchange reserves. Share of dollar accounted for 21.9%, share of gold - 16.7%, share of Chinese yuan - 14.7%.

Share of investments in America has dropped from 29.4% at the end of March to 9.6% at the end of June of last year. Share of regulator's investments in US dollars may be higher compared to share of investments in the US, since the Bank of Russia may have reserves in dollars in European banks.

As former deputy chairman of the Central Bank, head of the stock markets and financial engineering department of the RANEPA, Konstantin Korishchenko, told Vestnik Kavkaza that transition from dollar to euro was expected considering changing geopolitical conditions. "In current situation, compared to the US dollar, the euro is better in terms of activity and liquidity. Since the Central Bank had to maintain reasonable liquidity of foreign-exchange reserves, it logically chose to increase the share of euro, while decreasing the dollar's share."

"As for the yuan, it may act as a substitute for the dollar. Politically, it's a much more reliable asset because it does not depend on American regulators. Yen, on the other hand, isn't an attractive asset, because it has a low interest rate and constant tendency to get weaker, so I believe that the only reason that it's share was increased is diversification," he pointed out.

The head of the Financial Market Research Laboratory of the Gaidar Institute for Economic Policy, Mikhail Khromov, called record decline in the share of US assets in Russian reserves a justifiable step. "The main task of foreign-exchange reserves is to have diversified structure in order to depend on fluctuations in exchange rates of particular currencies less. Expansion and more diversified structure of reserves is a reasonable step. Although it's impossible to overlook some political component, since significant increase in the euro's share has certain political nature, because prior to that the euro and the dollar shares were pretty balanced," he said.


Vestnik Kavkaza

on YouTube