Currencies

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Russia reserves reach $121bn


Friday 10 December 2004

Russia reserves reach $121bn

MOSCOW: Russia climbed a place yesterday to sixth in the league table of countries with the world's largest central bank reserves as its stock of gold and foreign exchange rose to a record $121.6 billion.

Its reserves are also the fastest-growing, up 56pc this year through to December 3, having risen $4.5bn in the last week.

Unlike Asian tigers like China, whose gaping trade surplus with the US has led it to accumulate huge dollar balances, Russia's riches are driven by booming oil exports and central bank dollar buying to keep the rouble competitive.

While the growing cash mountain should help Russia pay down its foreign debts, the currency intervention - effectively cranking up the rouble printing presses - is boosting the money supply and fuelling inflation.

"There is a lag in the link between these liquidity injections, growth in money base and money supply, and finally inflation - about five months," said Jens Nystedt, senior emerging markets economist at Deutsche Bank.

Russia will overshoot its 10pc inflation target this year, but should scrape below last year's outcome of 12pc.

But cutting inflation next year to a target of 8.5pc looks a challenge.

l Russian Finance Minister Alexei Kudrin voiced concern about the decline of the US dollar yesterday, calling the US Federal Reserve policy short-sighted.

"The weakening of the dollar leads to a loss of confidence in this reserve currency. I do not think that this is a long-sighted policy on the part of the Federal Reserve," he said at a gathering with Russian banks in capital Moscow.

http://www.gulf-daily-news.com/Story.asp?Article=98504&Sn=BUSI&IssueID=27265



Russia may change exchange reserves
December 9, 2004

US dollar volume in Russia's gold and foreign currency reserves might be reduced, Sergei Ignatyev, the chairman of Russia's central bank, said yesterday, a day after the dollar sank to a new all-time low against the euro.

"We are thinking about possibly changing the structure of the gold and hard currency reserves ... when such changes are made they will not presuppose a sharp change in the structure."


Russia's hard currency reserves have been boosted by dollar revenue from soaring oil prices. "The sharp fall of the dollar against other currencies does indeed cause concern," Ignatyev said. - AP, Moscow


http://www.busrep.co.za/index.php?fSectionId=&fArticleId=2339277