Dow Jones Story on Russia and the $

June 10th, 2009 9:21 am | by John Jansen |

MOSCOW (Dow Jones)–Russia’s central bank said Wednesday it plans to reduce the proportion of foreign exchange reserves it invests in U.S. Treasury bonds as Moscow continues to bemoan the dollar’s status as a global reserve currency.

“We plan to cut the share of U.S. Treasuries since the window of opportunity to work with other instruments is opening,” Deputy central bank Chairman Alexei Ulyukayev told Russia’s State Duma, or lower house of parliament, according to a report by the Interfax news agency.

Russia holds around $400 billion in gold and forex reserves, the world’s third-biggest stash behind China and Japan.

Ulyukayev said reserves are just over 30%-invested in U.S. Treasuries at present. He didn’t specify by how much that figure would fall.

Ulyukayev said Russia would shift some into bonds issued by the International Monetary Fund and deposits at commercial banks.

Russian Finance Minister Alexei Kudrin said in late May that Moscow is ready to invest $10 billion in a potential bond issue by the IMF, which may raise debt to help support struggling nations during the global economic crisis.

The bond offering, which would be the IMF’s first, would be tailored to the so-called BRIC countries of Brazil, Russia, China and India.

“From an economic standpoint it makes sense,” said Roland Nash, chief strategist at investment bank Renaissance Capital in Moscow.

He said Ulyukayev’s comments should be seen against the background of a depreciating dollar and rising U.S. government debt burden.

“It shouldn’t come as a shock to anyone they’d already said they wanted to (reduce their dollar holdings),” Nash said. “It’s something (the central bank) will do gradually.”

China, which is the largest foreign holder of U.S. Treasuries, has shaken the dollar in recent weeks by suggesting that a greater share of global reserves should be denominated in Special Drawing Rights – a quasi currency issued by the IMF.

But since U.S. Treasury Secretary Timothy Geithner travelled to Beijing for meetings at the start of this month, the suggestions from Beijing have become less strident.

Moscow – as well as Beijing – has repeatedly criticized the dominance of the U.S. dollar in the global economy, saying a new supranational currency is needed to promote stability.

Russian President Dmitry Medvedev said recently that Moscow could mimic moves by China and Brazil, which have sought to raise the status of their currencies through swaps arrangements with one another.

Central bank Web site:

Thanks to reader Bob and others who sent or posted.

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  1. 3 Responses to “Dow Jones Story on Russia and the $”

  2. By frankl on Jun 10, 2009 | Reply

    all previous global currencies (UK pound, spanish/dutch/roman fiat currencies) were all underpinned by both trade and military might – the PRC navy is at least a decade away from having a bluewater capability (although, they could accelerate that if they could purchase USNor RN assets rather than make them) or if surface navies become moot by way of space-based assets, then perhaps the current config is of no consequence – however, when (in the past) reserve currencies were abandoned, it was not always known what other currency would fill the role, and there were centuries where there was indeed NO global reserve currency other than gold………regardless, the usd and usa econ/govt config is in the soup for sure

  3. By cdr on Jun 10, 2009 | Reply

    Being no expert on the IMFs navy, it does appear to me that sending some of these newly printed green shoot dollars to IMF – as promised – for them to swap their gold (and bonds) back to treasuries amounts to short circuiting someone’s reserve currency sys. Or is that merely a reflection of some short circuited minds that devised these past “accidental policies” of both types?

  4. By frankl on Jun 11, 2009 | Reply

    since the imf and world bank are largely funded by the usa, i concur with the view that there is only a thin veneer of diff between IMF-drawing-rights and the usd – and by extension, the USN *is* the IMF Navy as well, LOL

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