Russia May Lift Euro Share of Reserves: Euro Trades Near Record;
Nov. 23 (Bloomberg) -- The euro traded within a half cent of a record against the dollar after Russian central banker Alexei Ulyukayev said Russia may lift the share of its foreign-exchange reserves held in euros.
``Most of our reserves are in dollars and that's a cause for concern,'' he told reporters in Moscow. ``Looking at the dynamics of the euro-dollar rate, we are discussing the possibility to change the reserve structure.'' The dollar has dropped 7 percent against the euro in the past three months, reaching an all-time low $1.3074 on Nov. 18.
Against the dollar, the euro traded at $1.3061 at 11:21 a.m. in London from $1.3049 late in New York yesterday, according to electronic currency-dealing system EBS. The dollar was at 103.12 yen, from 103.15.
``The message is quite clear -- the euro is going to be more favored in comparison to the dollar and the impact will be dollar- negative,'' said Carsten Fritsch, a currency strategist in Frankfurt at Commerzbank AG.
Russia's foreign currency and gold reserves rose to a record $113.1 billion in the week ended Nov. 12. The central bank keeps about a third of its reserves in euros and the rest mainly in dollars, central bank deputy chairman Konstantin Korishchenko said in an interview on Nov. 3.
``China should be the next big central bank following Russia,'' said Fritsch at Commerzbank.
`Makes Sense'
China's international reserve assets climbed to a record $514.5 billion in September, accounting for about 15 percent of the world's total, excluding holdings of gold, according to data compiled by Bloomberg.
``Central banks are becoming more like professional fund managers -- they want to maximize returns,'' said Steven Saywell, chief currency strategist at Citigroup Inc. in London. ``It makes sense for central banks to reduce any aggressive overweighting in dollars.''
Demand for the dollar has waned on concern about the record deficit in the U.S. current account, the broadest measure of trade as it includes some investment flows. The gap was $166.2 billion in the second quarter. A wider deficit means more dollars need to be converted into other currencies to pay for imports.
The U.S. currency tumbled on Nov. 19 after Fed Chairman Alan Greenspan said overseas investors may tire of financing the U.S. current-account gap and diversify into assets denominated in other currencies. ``A diminished appetite for adding to dollar balances must occur at some point,'' he said at the European Banking Congress in Frankfurt.
``The U.S. is pursuing a weak dollar policy and the statement from Greenspan suggests that he joined that camp, to prefer a weaker dollar'' to help narrow the U.S. current account gap, said Fritsch.
To contact the reporter on this story: Rodrigo Davies at rdavies13@bloomberg.net.
To contact the editor responsible for this story: Dan Moss at or at dmoss@bloomberg.net. Last Updated: November
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