The overall decline in US dollar assets in the Bank of Russia portfolio amounted to $ 22.9 billion, or 19%. These are the results of the second quarter of 2021, published in the review of the Central Bank’s activities in managing foreign exchange assets. Experts told Izvestia about the reasons and likely consequences.
Exchange rate for euro and gold
Statistical data on the state of assets of the Central Bank of the Russian Federation are published no earlier than six months after the end of the reporting period – this information affects the state of financial markets. Now is the time to publish the data for the II quarter of the last year, and they demonstrate the continuation of the course taken to move away from the American currency.
In the first half of the year, the volume of dollar assets fell from $ 118.9 billion to $ 96 billion.According to the results of three reporting quarters (IV quarter of 2020 and I and II quarters of 2021), the share of the American currency decreased by 24%, or by $ 30.7 billion.
At the same time, in terms of US dollars, investments in other currencies increased: in euros – by 15.4%, to $ 189.1 billion, in yuan – by 2%, to $ 76.7 billion, in yen – by 12.8%, to $ 33.4 billion, in Australian dollars – by 28.3%, to $ 5.9 billion, in Canadian dollars – by 14.3%, to $ 17.6 billion.In addition, gold assets of Russia have risen in price by 3.84% , reaching $ 127 billion.
Russian investments in British pounds sterling decreased by $ 0.1 billion.
It is noteworthy that the total volume of reserve assets increased to $ 585.3 billion, or by $ 16.4 billion. That is, not only the volume of assets in US dollars decreased, but also their share, according to the results of the second quarter of 2021 – to 16.4%. At the end of 2019, this figure was 24.5%. In addition, the share of gold assets increased by 0.2%, to 21.7%, the share of the euro – by 3.5%, to 32.3%. And, despite the growth of reserves in Chinese yuan, their share in the total volume decreased by 0.1%, to 13.1%.
In different baskets
From an investment point of view, investment diversification is the most sensible strategy in an unstable global economy. The Central Bank of Russia is successfully demonstrating this strategy, says Ekaterina Kosareva, managing partner of the analytical agency WMT Consult.
– First of all, we are not talking about grievances and sanctions, but about creating an investment portfolio that will work stably in any scenario.… Previously, the share of the dollar was about half of the total volume of assets, and just this created a dangerous situation of dependence of the reserve on the pace of development of the US economy.
According to the expert, this trend will continue in the future.
– The role of the economies of the Asia-Pacific region will grow, and therefore, it makes sense to increase the volume of these currencies. Russia, of course, will not give up the US dollar in reserve currency assets, – Deputy Director of the Banking Development Institute Yulia Makarenko told Izvestia.
According to her, Changes in the structure of the Bank of Russia assets are due to the fact that the last two years have shown completely new economic processes on a global scale.
– Nobody expected the crisis that happened to us quite recently. And all the countries of the world have shown what they are really capable of. Of course, following the results, it would be logical to reconsider your attitude to various world economies, the expert adds.
The dollar is not the same
The decrease in the share of assets in US dollars is due to several reasons, says Askhat Sagdiev, General Director of Univer Capital.
– The first reason is the decline in the share of the dollar both in international settlements in general and in international trade of the Russian Federation. Since a significant part of the Central Bank’s reserves are balances on correspondent accounts of economic entities, the decline in the share of the dollar in their operations is reflected in the composition of the Central Bank’s reserves. The second reason is the systematic reduction of the RF investments in US sovereign bonds. The main volume of this decline fell on 2018, but gradually the reduction of positions in these securities continues. The third reason is the course to increase the share of gold in reserves, which has also been consistently pursued by the Central Bank for several years. Russia continues to buy gold, and gold in the long term continues to be in an upward trend. That is, the assessment of already accumulated reserves of gold and other precious metals in reserves is growing, and accordingly, their share is also increasing.
According to the expert, the first and third factors will be strong in the coming years. But declining investment in US bonds Sagdiev calls close to exhaustion: further investments in American Treasuries can no longer be significantly reduced.
– The US Federal Reserve has actually taken a course towards raising the discount rate, while the Euro Central Bank is still more restrained in tightening its monetary policy. Therefore, it is likely that the share of investments in American bonds of both the RF and Russian financial institutions may even slightly increase. However, the shares of the euro and the yuan are likely to continue to grow in the long term, – says the source of Izvestia.
Global trend
Until March 2018, the Central Bank of the Russian Federation held 43-48% of assets in dollars, and then began to shift funds in favor of the euro and the yuan amid tightening US sanctions against Russia, as well as a general deterioration in relations with the United States in recent years, reminds the analyst of FG “Finam” Alexander Potavin.
– For the period from June 30, 2020 to June 30, 2021, the Bank of Russia reduced the share of the dollar in the country’s international reserves from 22.2% to 16.4%. At the same time, the share of the euro increased from 21.7% to 31.7%, and the yuan – from 2.8 to 14.2%.
According to the expert, this event is not exceptional, but follows in line with the global trend of other central banks to reduce the share of the dollar in foreign exchange assets.
– According to the International Monetary Fund, in the period from 2015 to 2019, the share of the dollar in the foreign exchange assets of the world’s central banks (excluding gold) decreased from 66% to 61.69%.
At the same time, there is no talk of giving up the American currency as part of the country’s reserves:
– About six months ago, the head of the Bank of Russia Elvira Nabiullina said that the Central Bank of the Russian Federation did not plan to completely abandon the dollar in its reserves, despite the sanctions risks. The need to have the dollar in reserves is dictated by the need to maintain the country’s financial stability, the American currency still has a high share in Russia’s foreign trade settlements, and in addition, the dollar plays an important role in world financial markets, the expert concludes.
#Goodbye #America #Bank #Russia #reduced #share #assets #dollars