UNITED STATES, WASHINGTON (OBSERVATORY) — In order to prevent the dominance of the dollar in world markets, Russia increased the share of gold and other foreign exchange currencies to sharply reduce the dollar’s share.
The rise in Russian-Chinese trade means that the two countries will not abandon their mission to find an alternative to the US dollar, according to analysts.
The world’s major economies, including China and Russia, as well as several other countries such as Iran and Turkey, pioneered the fight against the dominance of the dollar in world markets, signed bilateral agreements in the last two years and multilateral to replace the dollar with local currencies.
The trend is gaining momentum as Washington uses access to the dollar-based payment system as a weapon to attack nations and individuals who violate US unilateral laws, even outside the United States.
The most recent method used by Russia and China to counter the dominance of the dollar is to use assets other than the dollar and make large purchases of gold.
Russia has halved its US dollar portion of its foreign exchange reserves by one-half, preferring to increase its gold, yuan and euro holdings, according to recent data from the country’s central bank.
The share of the dollar has fallen from 43.7% to 23.6% in 12 months from March 2018, said the Russian Central Bank in its report published on Tuesday 1 st of October. The paper was published six months late due to the “high sensitivity of prices to the actions of major market players”, including the central bank itself.
The Chinese currency saw the largest increase in Russian foreign exchange reserves with holdings in yuan rising from 5% to 14.2%, while gold reserves went from 17.2% to 18.2%.
The decline in the dollar’s share and the diversification of national reserves in Russia’s foreign exchange reserves began in 2017. Moscow continues to strengthen its holdings of foreign exchange and gold, adding $ 27.2 billion to its coffers to reach $ 487.4 billion during the reporting period. Driven by foreign currency acquisitions and gold purchases, Russia’s international reserves have exceeded half a trillion dollars since then, reaching $ 532.6 billion on 20 September.
Russian reserves mainly consist of liquid cash flows, including stock markets, gold, foreign exchange and the Special Drawing Right (SDR) held as deposits with the Russian Bank.
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