On Thursday, June 8, Russia became the latest in the list of countries that shifted a part of its Central Bank reserves from the dollar. Sergei Ignatyev, chairman of the Central Bank, said that only 50 percent of its reserves are now held in dollars, with 40 percent in euros and the rest in pounds sterling. Earlier it was believed that just 25-30 percent of Russia’s reserves were held in euros, with virtually all the rest held in dollars.
Russia's gold and foreign currency reserves have grown rapidly over the last few years in tandem with high oil and gas prices. As MosNews has reported earlier, Russia currently has the world’s fourth-largest reserves, after China, Japan and Taiwan, and it looks to overcome Taiwan by the end of the year, with reserves growing by $5-6 billion monthly.
The Russian Central Bank's move ties in with increasing signs"This is a bearish development for the dollar," Chris Turner, head of currency research at ING Financial Markets, told the British Financial Times. "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, told the paper: "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."
Moscow's move was unsurprising. Russia's $71.5billion Stabilization fund, which accumulates windfall oil revenues, is due to be converted from rubles to 45 percent dollars, 45 percent euros and 10 percent sterling. The day-to-day movements of the ruble are monitored against a basket of 0.6 dollars and 0.4 euros. About 39 percent of Russia’s goods imports came from the eurozone in 2005, against just 4 percent from the US.
The statement plays into a perception that central banks, which together hold $4.25 trillion of reserves, are increasingly channeling fresh reserves away from the dollar to reduce potential losses if the dollar was to fall sharply.