Wednesday, November 25, 2020
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Russia's gold and foreign currency reserves have grown considerably
Over the period from September 24 to October 1, they grew by $1 billion, to a total of $95.3 billion. Interestingly, the trend is in its sixth straight week with the reserves growing by a total of $7 billion in this period. As a result, Russia has the world's fourth largest reserves of gold and hard currency (compared to the August 2004 figures), surpassing long-time leaders like the United States, Germany and France. The country now only trails Japan, China and Singapore, although they are well ahead. However, a close study of the increase shows that the gold reserves remained at the same level, and they are currently estimated at $3,754,000,000. This means, the country's augmented riches are due to the Central Bank's massive purchasing of US dollars on the domestic market. This is the result of the financial policy the Russian authorities have pursued over the past few years. Under the law on currency regulation, the Central Bank has the right to set aside funds to limit capital movement, a step that should be agreed on with the government. It is designed to prevent currency fluctuations in the national currency and ensure a sustainable balance of payments. The Central Bank has persistently pursued the objective of preventing the ruble from strengthening too much, and bought up "extra" dollars on the market to this end. The Bank's reserves were expected to exceed $100 billion by the year's end, according to Alexei Ulyukayev, deputy chairman of the Bank's Board of Directors. However, the plan went to pieces in recent weeks as the gold and currency reserves were being accumulated at a dramatic rate. Russia's reserves may reach the set figure ahead of schedule. The reason is record high global oil prices. Russian oil producers took advantage of the favourable situation on the market last month and increased oil exports considerably. Accordingly, the dollar flow to Russia's financial market was much more intensive. Any one-dollar rise in oil prices immediately injects hundreds of millions of dollars into Russia, according to experts. When oil prices exceed $40 per barrel, the US currency simply floods the Russian market. Under the circumstances, the Central Bank can only "tie it up", thereby, boosting the national gold and currency reserves.
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