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Barclays pledges to continue silver fund despite price plunge
By Kevin Plumberg
Reuters
Friday, April 21, 2006
http://today.reuters.com/investing/financeArticle.aspx?
type=bondsNews&storyID=2006-04-
21T180323Z_01_N21256689_RTRIDST_0_ECONOMY-RUSSIA-DOLLAR-UPDATE-2.XML
WASHINGTON -- Russian Finance Minister Alexei Kudrin on Friday
questioned the dollar's pre-eminence as the world's "absolute"
reserve currency, given its recent volatility and the size of the
U.S. trade deficit.
The remarks helped send the dollar lower against major currencies
and caused Wall Street analysts to wonder whether central banks will
increasingly diversify their holdings out of dollars.
Kudrin, in Washington for the semiannual meetings of the
International Monetary Fund and World Bank, told reporters at a news
briefing the dollar's value had not been very stable in the past
several years, particularly against the euro.
"This causes significant changes in the international situation and
that is why we do not understand the U.S. dollar at the moment as
the universal or absolute reserve currency," he said. "The
international community can hardly be satisfied with this
instability."
"Whether it is the U.S. dollar exchange rate or the U.S. trade
balance, it definitely causes concerns with regard to the dollar's
status as a reserve currency," Kudrin added.
The euro initially jumped nearly half a cent against the dollar to a
session high around $1.2360 after Kudrin's comments, but later pared
these gains to trade around $1.2335, still up a little on the day.
Russia's foreign currency and gold reserves of $212 billion are the
largest of any country outside of Asia.
Currency traders were especially sensitive to any remarks regarding
the dollar's reserve status after the Swedish central bank earlier
Friday said it had decreased its holdings of dollars to 20 percent
from 37 percent of total holdings.
It increased its euro reserves to 50 percent from 37 percent.
The dollar declined more than 30 percent against a basket of major
currencies from 2002 to the end of 2004, largely on concerns over
the growing U.S. trade deficit -- which last year widened to $723
billion, nearly 6 percent of gross domestic product.
However, last year the dollar rallied 13 percent, thanks largely to
the Federal Reserve's campaign of steady interest rate increases.
The dollar composes around two-thirds of the foreign currency
reserves of central banks around the world, while the euro makes up
nearly a quarter, according to the latest data from the
International Monetary Fund.
Some of Russia's oil revenues are being kept in a budget
stabilization fund, currently worth $60 billion, and the Finance
Ministry has proposed investing the money in highly-rated fixed
income assets denominated in dollars, euros and British pounds.
Asked whether Russia will continue to recycle its so-called
petrodollars back into U.S. financial assets, Kudrin said only, "We
are developing cooperation in the international arena."
Russia's central bank rejigged its guide to daily reserve weightings
in March but did not reveal how the basket of currencies would be
composed. Last year, the central bank tweaked its guide to 60 U.S.
cents for every 40 euro cents from 65/35.
The country's central bank continues to accumulate additional
reserves at a rapid rate as it soaks up windfall oil revenues and
prints roubles to maintain a competitive exchange rate.
Turning to the issue of Russia's proposal to repay around $12
billion of debt owed to the Paris Club of international creditors,
Kudrin said he expects a decision as early as next month.
Russia, which has benefited from the skyrocketing price of oil, paid
back $15 billion of debt last year. But Kudrin did not comment on
the $28 billion of additional debt owed to the Paris Club and a
potential schedule of repayment.
U.S. crude oil futures rose to a record $75 per barrel on Friday.
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