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Dollar Slide Leads To Currency Conundrum

Published: May 12, 2006 (Issue # 1168)


MOSCOW The Central Bank has a money problem most people would die for: too many dollars.

Its sort of caught between a rock and a hard place, said Peter Westin, chief economist at MDM Bank, referring to the delicate balance Russia faces in investing what this last week became the worlds fourth-largest foreign currency reserves.

Finance Minister Alexei Kudrin said Wednesday that he expected large trading partners such as China and India to include rubles in their own foreign currency reserves, but the more pressing problem for the Finance Ministry is what to do with its own $226 billion in international reserves, most of which is in dollars and euros.

In the last month, the dollar has dropped 2.5 percent against the ruble, and since December the greenback has slid almost 7 percent, representing a drop of several billion dollars in the value of the Russian foreign currency reserves, in ruble terms.

The dollar problem heated up when Swedens central bank announced last month that it would decrease its dollar holdings from 37 percent to 20 percent. The same day as the Swedish announcement, Kudrin told a New York meeting of the International Monetary Fund that the dollar was losing its position as the worlds stable reserve currency, and the greenback immediately weakened in response.

In recent months, the Central Bank has been making available less information about how much of the foreign reserves are in dollars and euros.

Markets become more sensitive when there is a lack of information, said Yevgeny Gavrilenkov, chief economist at Troika Dialog. Eventually everything that they attempt to hide will be known. If there is an unexpected change, the market could be surprised.

In the past, the Central Bank has said it would decrease the dollar ratio of foreign currency reserves to $60 for every 40 euros (from $65 for every 35 euros previously), but there have not been any more announcements along these lines in more than a year, Gavrilenkov said.

Kudrins attack on the dollar in New York was probably politically motivated, Gavrilenkov said, adding that it was a mistake because it had the effect of reducing the value of Russias dollar reserves.

Some experts say the foreign reserve, which has doubled to $226 billion since November 2004, is simply too large: Some of the money could be invested more profitably, or it could be spent on government programs such as education. Russia and other emerging economies are not getting the best deal on investments in their huge currency reserves, and they may be putting too much in the bank, Lawrence Summers, former U.S. Treasury Secretary, said in a March speech at the Reserve Bank of India.

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ALL ABOUT TOWN

Wednesday, Sept. 3


Although thesand sculptures at the Peter and Paul Fortress are more centrally located and therefore more visible to the throngs of tourists, the 300th Anniversary Park of St. Petersburgs own collection closes today so fans of the classic beach activity should get there while they can.



Thursday, Sept. 4


Vladimir I. Danchenkov, Head of Baltic Customs, will be in attendance during AmChams Customs and Transportation Committee Meeting convening this afternoon at the organizations office near St. Isaacs Square at 3 p.m.



Friday, Sept. 5


Scrabble lovers and chess masters get their chance to assert their intellectual dominance at the return of the British Book Centers Board Game Evenings tonight. Held weekly on Friday nights, the event gives both board game lovers and those hoping to improve their English the chance to meet, greet and compete. Check out the centers VK page for more details.



Saturday, Sept. 6


Athletes will relish the chance to get the latest gear and try out something new at I Choose Sport, an annual event at Lenexpo forum that plans to welcome more than 30,000 people this week to the international exhibition center. Not only will visitors get to try their hand at various athletic endeavors but they will also be able to peruse equipment that can fulfill their dreams of becoming a champion.


Local KHL team SKA St. Petersburg open their season this evening at home against Lokomotiv Yarovslavl at the Ice Palace arena next to the Prospekt Bolshevikov metro station. See their website for a full schedule and available tickets.



Sunday, Sept. 7


Check out retro and antique cars at Fort Konstantin on Kronstadt Island in the Gulf of Finland at FORTuna, a yearly car festival that highlights the eccentricities of the Soviet automobile industry. A car race, contests and a stunt show will give visitors a chance to rev their engines.



Monday, Sept. 8


This evening marks the opening of the two-week ballet festival High Season at the Mikhailovsky Theater. Check the theaters website for more details about performances and featured dancers.



Tuesday, Sept. 9


Discuss the latest news and issues at the AmCham Hazardous Waste Management Roundtable this morning in the Tango Conference Hall of the Sokos Hotel Palace Bridge on Birzhevoy Pereulok. Starting at 9 a.m., planned topics include the Krasny Bor landfill and waste transportation between Russia and Finland.


Learn more about the citys modern architectural trends at the SPIBA Real Estate and Construction Committees meeting on the topic Contemporary Petersburg Style: What is It? Participants will get the chance to discuss whats in-demand with RBI Holdings Irina Petrova and Lubava Pryanikova, and the current state of the local real estate market. Please confirm your attendance by Sept. 5 through SPIBAs website if you wish to attend.



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