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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

Thursday, Nov. 27


The Customs and Transportation Committee for AmCham meets this morning at 9 a.m. in their office on Ulitsa Yakubovicha.


Tickets are still available for local KHL team SKA St. Petersburgs showdown with Siberian club Metallurg Novokuznetsk tonight at 7:30 p.m. in the Ice Palace outside the Prospekt Bolshevikov metro station. Tickets can be purchased on the teams website, at the arena box office or in their merchandise store on Nevsky Prospekt.


Celebrate one of Russian literatures most tragic figures during Blok Days, a two-day celebration of the 134th anniversary of the poets birthday. The tragic tenors work, which led to writer Maxim Gorky to hail him as Russias greatest living poet before his death in 1921, will be recited and meetings and discussions about his contributions to the Silver Age of literature in St. Petersburg will be discussed in the confines of his former residence.



Friday, Nov. 28


Join table game aficionados at the British Book Centers Board Game Evening. Held every Friday at 5 p.m., aficionados and amateurs alike can come take part in a variety of different games that test ones intellect and cunning.



Saturday, Nov. 29


Cats, dogs, birds, rodents and reptiles are just some of the things that will walk and crawl at Lenexpo convention center this weekend as part of Zooshow, a two-day exhibition featuring not only mans best friends but a four-legged fashion show, as well as a food fair that will help pet owners find out more about which kibbles are best for their hungry pets.



Sunday, Nov. 30


Remember the 75th anniversary of the beginning of the Russo-Finnish war in 1939 during todays reenactment titled Winter War: How it Was. More than 200 people will take part in recreating the opening salvoes of the battle for the north in Kamenka, a small village situated between Vyborg and St. Petersburg, using authentic equipment and vintage vehicles from the era. The faux battle begins at 2 p.m.



Monday, Dec. 1


Serbia filmmaker Emir Kusturica is the featured guest this evening at the Lensovet Palace of Culture the Petrograd Side. Fans of the director will get the chance to watch his movie Black Cat, White Cat, as well as ask questions about his award-winning filmography. Tickets for the event, which starts at 7 p.m., start at 2,000 rubles ($42.50).



Tuesday, Dec. 2


Today is the final day of Takoy Festival, a three-week program of plays based on the works of Dostoevsky, Remarque and other famed European writers, whose work is transcribed for theatrical performances. Tonights festival finale is Fathers and Sons, a two-act drama staged by the Novosibirsk Academic Drama Theater based on Turgenevs classic about familial relations.



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