– Central bank moves reserves to euros, yuan in broad shift
– Fearing more U.S. sanctions, Russia moved out of dollar
Russia’s central bank dumped $101 billion in U.S. holdings from its huge reserves, shifting into euros and yuan last spring amid a new round of U.S. sanctions.
The central bank moved the equivalent of $44 billion each into the European and Chinese currencies in the second quarter, according to a report published on late Wednesday by the Bank of Russia, which discloses the data with a six-month lag. Another $21 billion was invested in the Japanese yen.
The Chinese currency accounted for 15 percent of total holdings at the last reading, up from 5 percent at the end of the first quarter, according to the report. That puts Russia’s yuan share at about ten times the average for global central banks, with its total holdings of the currency accounting for about a quarter of world reserves in yuan, according to International Monetary Fund data. Morgan Stanley estimated Russia was the main buyer of Chinese bonds last year.
“Russia is making a strategic shift in its reserves towards holding fewer dollars and more assets in other currencies,” said Benn Steil, director of international economics at the Council on Foreign Relations in New York.
The data reveal a dramatic acceleration in a policy Russia has been pursuing for several years of reducing exposure to assets that could be affected by U.S. restrictions. Tough sanctions on major Russian companies in early April hammered the ruble and spurred fears that more restrictions could follow, such as measures to cut Moscow off from global payment systems. Russian holdings of U.S. Treasuries dropped by about $81 billion in May and June, according to U.S. data.
Russia isn’t alone in its bid to reduce reliance on the world’s reserve currency amid increasing attempts by Washington to use economic leverage for geopolitical ends. In a deepening trade war with America, China sold a large portion of its U.S. Treasury holdings last year and officials in Europe put forward proposals to increase the use of the euro in regional transactions.