|
Russia may switch foreign exchange reserves into euros { November 23 2004 } Original Source Link: (May no longer be active)
http://news.ft.com/cms/s/7f2f70b6-3d3f-11d9-abe0-00000e2511c8.htmlhttp://news.ft.com/cms/s/7f2f70b6-3d3f-11d9-abe0-00000e2511c8.html
Dollar hits fresh low against euro
By Steve Johnson in London
Published: November 23 2004 11:14 | Last updated: November 23 2004 17:48
The US dollar fell to a fresh low against the euro on Tuesday, breaching the $1.31 barrier for the first time.
The cataylst was a hint from the Russian central bank that it plans to step up its policy of switching its foreign exchange reserves into euros, at the expense of the dollar.
Alexei Ulyukayev, the first deputy chairman of the Russian central bank, told reporters: "Most of our reserves are in dollars and that's a cause for concern. It's a real problem.
"Looking at the dynamics of the euro/dollar rate, we are discussing the possibility to change the reserve structure."
Russia, which had a record $113.1bn of foreign reserves as of November 12, is already believed to hold some 25-30 per cent of these reserves in euros, with the bulk of the rest in dollars.
Analysts speculated it could move towards a 50-50 split, or even push its euro holdings as high as 60-65 per cent, in line with the basket arrangement it is believed to prefer for the management of the rouble, at the expense of its current "dirty" float against the dollar.
More importantly, the Russian comments highlighted the prospect of Asian central banks with larger reserves following suit. China has an estimated 80 per cent of its $515bn of reserves in dollars, while Middle Eastern central banks were rumoured to be selling dollars and buying sterling on Tuesday.
"This reminds people that Asia still has the vast majority of its FX reserves in dollars and some reallocation of these reserves must be assumed," said Hans Redeker, head of currency strategy at BNP Paribas.
The upshot was that the dollar fell as low as $1.3105 against the euro, before moderating to $1.3097 by mid-session New York trading, a fall of 0.5 per cent on the day. The greenback also fell 0.6 per cent to a fresh eight-year low of SFr1.1564 against the Swiss franc, 0.7 per cent to a nine-month low of A$0.7877 against the Australian dollar, 0.7 per cent to a four-month low of $1.8726 against sterling and 0.9 per cent to a seven-month low of Rbs28.49 against the rouble itself.
However the dollar held its own against Asian currencies, which were undermined by rising oil prices, fresh intervention from South Korea, renewed speculation that the Bank of Japan may return to the market today and comments from Li Ruogu, the deputy governor of the People's Bank of China, in yesterday's FT that suggested a renminbi devaluation was not imminent.
One-year non-deliverable renminbi/dollar forwards narrowed from a discount of 4,050 points to 3,900 points, implying a one year rate of Rmb7.888 to the dollar. The yen's weakness saw it fall 0.6 per cent to Y135.37 against the euro and 0.9 per cent to Y193.53 versus sterling.
The pound firmed 0.2 per cent to £0.6994 against the euro, aided by the breaching of technical barriers and the rumoured Middle Eastern buying.
|
|
