Russia Raised Share of U.S. Assets, Cuts French Holdings
Russia boosted the share of U.S. government notes in its currency reserves at the end of last year as it lowered holdings of French, German, U.K. and Danish assets, the central bank said.
U.S. assets including government bonds and deposits rose to 33.8 percent as of Dec. 31, a gain of 1 percentage point from three months earlier, the central bank said in a report on its website today. Bank Rossii decreased investments in France to 26.4 percent from 28.3 percent, and the portion of U.K. assets shrank to 9.2 percent from 9.9 percent. Canadian holdings more than doubled to 1.9 percent from 0.7 percent at the end of the third quarter.
While President Vladimir Putin has criticized the dominance of the U.S. dollar and pledged this week to maintain the euro’s share in his country’s holdings, its reserve managers were boosting allocations to the world’s biggest economy even after last year’s borrowing-limit debate in Congress and Standard & Poor’s downgrade of the U.S. government’s credit rating one step to AA+ in August.
The worsening debt turmoil in the euro area forced Spain and Cyprus to seek external aid last month. U.S. Treasury yields dropped to a record this week as Moody’s Investors Service cut its outlook on the top credit ratings of Germany, the Netherlands and Luxembourg on July 23, citing “rising uncertainty” over Europe’s crisis.
The Russian central bank signaled last year that it probably won’t add currencies to its reserves after expanding into Canadian and Australian dollars. Russia, which holds the world’s fourth-largest foreign-currency and gold reserves after China, Japan and Saudi Arabia, plans to create an agency to bolster returns earned by the government’s two sovereign wealth funds, Putin said in May.
The central bank, which now manages the holdings, added the Aussie this year, with plans to raise its portion to at least 1 percent, according to First Deputy Chairman Alexey Ulyukayev.
“We’d of course like to be changing the structure of our currency portfolio and diversifying currency risk,” Ulyukayev said in an interview to Ekho Moskvy radio in May. “To do that, you need to add new currencies. And we’re doing that.”
Russia’s international currency and gold reserves rose for the first time in four weeks, adding $2.4 billion to $507.7 billion as of July 20, the central bank said in a statement on its website today.
Among the countries that saw their share in Russian reserves grow last year were Japan, the Netherlands and Finland, while holdings of assets in international financial institutions slid to 1.5 percent from 2 percent, according to the report.
Investments in U.S. assets rose to as high as 41 percent at the end of the third quarter in 2010, Bank Rossii data show. The Finance Ministry excluded Ireland and Spain from a list of countries approved for bond investment by Russia’s two sovereign wealth funds in November 2010 before adding Spain back on the list four months later.
The funds, which are managed by the central bank under guidelines set down by the Finance Ministry, can also invest in state debt of Austria, Belgium, Britain, Germany, Canada, Denmark, Luxembourg, Netherlands, U.S., Finland, France and Sweden.
International Monetary Fund data show the dollar accounted for 62.2 percent of global currency reserves in the first quarter, unchanged from the previous three months and down from 72.7 percent in 2011. The euro’s share fell to 24.9 percent from a peak of 28 percent in 2009.
A category the Washington-based IMF calls “other currencies,” which strategists say includes the Australian, New Zealand and Canadian dollars was at 5.2 percent, down from 5.3 percent in the preceding quarter and compared with 1.8 percent at the end of 2007.
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