2022 – Russia’s Cenbank plays down the role of the dollar and the euro locally and globally from Reuters

© Reuters. Reuters/Maxim Shemetov.

(Reuters) – The Russian Central Bank said on Tuesday that the role of the dollar and the euro as global currencies is expected to diminish as central banks reconsider their strategies after the West froze Russian reserves, and proposed negative interest rates on the dollar and the euro to introduce deposits. .

Unprecedented Western sanctions froze about half of Russia’s gold and foreign exchange reserves, which amounted to nearly $640 billion, before Moscow launched a so-called “special military operation” in Ukraine on February 24.

The Bank of Russia said that this precedent, along with discussions about the possible seizure of the frozen part of the reserves, will prompt other central banks, especially in Asia and the Middle East, to reconsider their strategies for their savings.

“One can expect an increase in the demand for gold and a decline in the role of the dollar and the euro as currency reserves,” the Russian Central Bank said in a report on financial stability.

At the end of 2021, the Central Bank of Russia held $131.5 billion of its gold reserves, while the rest of the reserves, totaling $612.9 billion at that time, were held by foreign currency investments. On May 20, Russia’s reserves fell to $583.4 billion.

Recently, the Central Bank said, the share of foreign currencies in the obligations of Russian banks decreased, as customers increased their withdrawals from their accounts in foreign currencies, while the share of banks’ investments in foreign currencies increased.

“One of the results of the sanctions restrictions imposed on the foreign exchange market was the tendency to increase the use of currencies that are alternative currencies to the US dollar and the euro,” the central bank said, in special reference to Jizan.

The Central Bank said that to accelerate the decline in the share of foreign currency in the Russian banking sector, Russia may consider introducing negative interest rates on bank deposits denominated in dollars and euros.

At the end of 2021, the share of foreign exchange in family wealth, including stocks and deposits, was relatively stable at 22%, and the central bank said it had no plans to reduce it.

The central bank also said in the report that Russian retail investors have become the main driver of the stock market amid restrictions on non-residents trading in Russian markets.

(1 dollar = 61.1,000 rubles)