Russia is radically shifting its foreign exchange reserves away from the dollar
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Donald Trump likes to be a good friend of Russia. But current movements in the currency markets prove: The Kremlin is trying everything to break free economically from the US - with worldwide consequences.
OThe US President Donald Trump and his Russian counterpart Vladimir Putin are having a good relationship. Almost every day Trump rages against the special investigator Robert Mueller and calls the Russia investigation a witch hunt. Vladimir Putin had by no means manipulated the American presidential election.
But who wants to know how it is really ordered to the relations between America and Russia, studies better the statistics of the Russian central bank. And these signals that a new cold war has long broken out between the two great powers. The Kremlin is by no means a partner of America, but tries everything to break free from the former archenemy.
Russia has radically redeployed its billions of foreign exchange reserves. In the second quarter of 2018 alone, $ 100 billion of US dollar assets were liquidated and the money put into other currencies. This is shown by data released by the Russian central bank. Afterwards, 44 billion dollars were invested in euros and yuan, the Russians in the Japanese yen put in the equivalent of 21 billion dollars.
As a major exporter of oil and gas, the Kremlin is sitting on a huge treasury. The foreign exchange reserves of currently $ 467 billion are among the highest in the world. At the end of the second quarter, 15 percent was invested in yuan. Three months earlier, the share was only five percent, in the second quarter of 2017 even only 0.1 percent. Thus, Russia has bought up a quarter of the world's yuan reserves. This shows how radical the swing has turned out.
According to calculations by the US investment bank Morgan Stanley, Russia was said to have been the most important buyer of Chinese bonds last year. Whole 90 percent of the debt of Beijing should have acquired the Kremlin. The foreign exchange reserves of the states are not stored in coins and banknotes in large vaults, but are mainly in government bonds of the respective country. Dollar reserves in US Treasuries, Euro reserves in Bunds and Yuan reserves in debt from China.
Russia repells its US government bonds
One of the profiteers was the euro. Its share of Russian reserves increased from 25 percent in mid-2017 to 32 percent a year later. In the same period, the share of dollar investments halved to 22 percent. "Russia makes a strategic shift away from dollars to other currencies," said Benn Steil, an economist at the think tank Council on Foreign Relations, Bloomberg. The purchase of Chinese papers is further proof that the Russians are forging a new alliance with China as a counterweight to America.
The figures released by the Russian central bank six months later are in line with another statistic that caused a sensation last year. According to figures from the US Treasury, Moscow has repelled nearly all of its US Treasury bonds. Last spring, the Kremlin dropped 81 percent of its Treasuries. The Russian stock of American bonds is now just a measly 14.6 billion dollars. Only a few years ago, the Russians had held 176 billion US assets.
One reason is the sanctions imposed by the Americans against Russia. In April, Washington issued unexpected sanctions on Rusal, knocking out the Russian aluminum company. The commodity giant was not so much fatal that he could no longer sell his aluminum everywhere, but that he could no longer afford interest on his dollar bonds. Vladimir Putin impressively demonstrated just how vulnerable not only his national economy and its companies are, but also its foreign exchange reserves and how much it depends on the grace of the Americans.
Other states are getting away from the dollar
"America uses the dollar as a weapon," says Charles Gave, strategist at the independent analysis firm GK Research. "Worldwide dollar-dollar transactions can be banned by Washington with a stroke of the pen." The sale of US dollar assets is proof that Moscow wants to become more independent of America. "We are not repelling the dollar, the dollar is repelling us," Russian President Putin said last November. "The unreliability of the dollar system makes other countries look for alternative foreign exchange reserves. We're not the only ones, believe me. "
In fact, many states want to elude the dollar dictates. The leaky unilateral policy in Washington could shake up the architecture of the monetary post-war order. A first trend is showing new data on the composition of international foreign exchange reserves (COFER). The International Monetary Fund (IMF) publishes the data once a quarter. In the third quarter of 2018, the dollar's share of the world's official foreign reserves fell to 61.9 percent. That was the lowest value in five years. By contrast, the euro has risen slightly. A good fifth of all reserves are bunkered in the European single currency.
Gold is also one of the preferred investment vehicles of the Russians. The precious metals shortage has quadrupled in the past ten years. Gold is a kind of stateless currency and thus armed against any political sanctions.