Russian foreign currency reserves in danger
The assets and currencies which the Bank of Russia holds funds in are depreciating rapidly, reports Finanz.ru. For example, gold, which the Central Bank of Russia has been actively purchasing for several years, has hit its lowest price since last year, dropping by roughly 8.5% compared to its April high.
Recently published data showed that last year the Bank of Russia began to actively accumulate reserves in Chinese yuans, tripling these investments. However, as part of its “trade war” with the US, the People’s Bank of China began to deliberately devalue its currency, and in a short period of time the yuan fell by as much as 7.5% to the dollar.
In the fourth quarter of 2017, the Central Bank of Russia increased the proportion of its assets denominated in Chinese yuans from 1% to 2.8%.
Recently Russia has made a record reduction in its investments in US sovereign debt, halving its holdings in US dollars.
As of May 1, the proportion of US bonds in Russia’s Central Bank’s reserves was 10%, less than $50 billion.
Starting in April, however, the US dollar has strengthened versus all other currencies.
The dollar index to a basket of six primary currencies is in a steady rising trend. This all threatens Russia’s international reserves – they are shrinking.
In just a week, Russia’s Central Bank lost roughly $6 billion. On June 15, its foreign currency reserves were worth $462.4 billion, but by June 22, its foreign currency reserves were worth only $456.3 billion, i.e. $6.1 billion less.
For understandable reasons, the Central Bank of Russia has been trying to avoid the US dollar, but recently only the dollar has tended to appreciate.