(Kitco News) According to the Russian central bank, central banks, especially those in Asia and the Middle East, will rethink their foreign exchange reserve strategies on the US dollar and euro with the recent use of western financial sanctions.
After Ukraine invaded Ukraine on February 24, a series of financial restrictions were imposed on Russia, including restrictions on the reserves of the Central Bank of Russia, freezing about half of Russia’s $ 642 billion reserves. ..
Russia expects other central banks, especially those in Asia and the Middle East, to buy more gold and choose currencies such as the renminbi against the US dollar and euro.
“We anticipate an increase in demand for gold and a diminishing role in the US dollar and euro as reserve assets,” the Central Bank of Russia said in a report on financial stability. “According to the World Gold Council, global gold demand increased by 34% annually in the first quarter of 2022. Against the backdrop of these global changes, there are times when global market volatility is rising, which is the rise in interest rates. “
The Central Bank of Russia said all moves to assets like gold were due to Western sanctions on Russia and the possibility of seizing the frozen portion of Russia’s reserves.
“One of the consequences of the sanctions imposed on the foreign exchange market was the tendency to increase the use of currencies instead of the US dollar and the euro,” the central bank said, pointing out the yuan.
The Central Bank of Russia added that it could even consider introducing negative interest rates on bank deposits in dollars and euros.
Back in April, the Central Bank of Russia announced it Further reduce US dollar holdings earlier this yearHe added that despite the effects of Western sanctions, there was sufficient yuan and gold.
According to the data, the central bank reduced its share of the US dollar in reserves to 10.9% as of January 1, 2022. This is a decrease from 21.2% in the previous year. Meanwhile, the yuan’s holdings rose from 12.8% to 17.1% and the euro’s holdings rose from 29.2% to 33.9%.
The share of gold reserves decreased from 23.3% to 21.5%. According to the latest IMF data, Russia has about 2,300 tonnes of gold as of the end of January, which is the fifth largest owner of sovereign gold.
Russia’s reserves are currently about $ 583.4 billion.
The Central Bank of Russia is implementing a clear goal — reading the euro further away from the US dollar.
“While the US dollar and euro’s role in the Russian market will begin to decline, the currency of friendly countries will become more important and the ruble’s role in the settlement of foreign trade operations will increase,” the bank said. Tuesday.
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