From Russia Today, June 11, 2009, with Commentary by Misha
- The U.S. dollar and U.S. Treasuries declined after Russia said it would buy $10 billion worth of IMF's first-issued bonds, moving out of US debt.
This is the latest move in Russia's attempt to diversify reserves away from the greenback. Brazil said it would also buy $10 billion and China $50 billion dollars worth of IMF bonds.
Video Below: Russia Today's Dmitry Medvedenko speaks with Chris Weafer, Chief strategist at Uralsib, about the calls for a new global reserve currency, how this impacts on the crude oil price, and what the implications for the Russian Rouble are. (Click on video below to view.)
.
.
Russia, China set to move reserves out of US dollar
By Alex Nicholson, Bloomberg, June 10, 2009 with commentary by Misha added
-- Russia’s central bank said it may cut investments in U.S. Treasuries, currently valued at as much as $140 billion, a week after China said it may reduce reliance on the dollar and American bonds.
Treasuries fell after Alexei Ulyukayev, first deputy chairman of Bank Rossii, said some reserves may be moved into International Monetary Fund debt. The yield on the 10-year note rose six basis points, or 0.06 percentage point, to 3.92 percent as of 8:27 a.m. in New York, according to BGCantor Market Data.
Finance Minister Kudrin said on May 26 Russia will buy $10 billion of IMF bonds from the reserves and China may buy as much as $50 billion, IMF Managing Director Dominique Strauss-Kahn said yesterday. Some investors are wary of U.S. assets because the budget deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion, the Congressional Budget Office says.
“The bigger picture is people are worried there are too many Treasuries, and that no one is even making a pretense of getting the fiscal deficit under control,” said Francis Beddington, co-founder of Insparo Asset Management, which oversees about $140 million in London.
Treasury Secretary Timothy Geithner said in Beijing on June 2 there will be enough demand for record sales of U.S. debt. He met with Chinese officials after Premier Wen Jiabao called in March for the U.S. “to guarantee the safety of China’s assets” and central bank Governor Zhou Xiaochuan proposed a new global currency to reduce reliance on the dollar.
China, Russia and Brazil are among a handful of nations that have expressed interest in purchasing the securities.
China is “actively” considering buying as much as $50 billion of the IMF bonds, the State Administration of Foreign Exchange said last week.
IMF securities would give countries a different way to contribute to the fund and are unlike traditional bonds because they pay an interest rate pegged to the IMF’s basket of currencies, known as Special Drawing Rights.
Ulyukayev said Russia will cut the share of U.S. Treasuries “because a window of opportunity for working with other instruments is opening,” according to Interfax news wire. Russia may also place more of the reserves in deposits with foreign banks, he said. The remarks were confirmed by a Bank Rossii official who declined to be named, citing bank policy.
Maxim Oreshkin, head of research at OAO Rosbank in Moscow, said the shift into IMF debt won’t happen immediately.
“The central bank has never stood out for making fast moves with its reserves,” Oreshkin said. “If it changes certain groups it will happen smoothly.” Investing in the IMF may bring “political dividends” for Russia as it “raises the role of Russia in the IMF.”
Still, Brazil, Russia, India and China increased foreign reserves by more than $60 billion last month to limit currency gains as the first global recession since World War II restricted exports, data compiled by central banks and strategists show. Russia added the most foreign exchange since July.
President Dmitry Medvedev questioned the U.S. dollar’s future as a global reserve currency last week and said that using a mix of regional currencies would make the world economy more stable. He renewed his call for consideration of a supranational currency to challenge the dollar.
The IMF, which has rescued economies from Pakistan to Iceland in the past year, has never issued bonds and is seeking more cash to finance loans and aid to member countries during the worst economic slump in the fund’s 64-year history.
See update: Russia, Brazil Plan to Buy $20 Billion IMF Bonds
Above: Chart showing the growth of total U.S. debt (private and public) as a percentage of U.S. GDP. Total U.S. debt began to grow dramatically around the time of the Reagan Administration, in 1981, and it has continued to soar unabated since that time. The U.S. now faces the extraordinary dilemma of choosing whether to deflate its massive debt bubble (possibly precipitating an economic crisis greater than the Great Depression) or continuing to print dollars to pump up an even larger and more dangerous bubble. Recent experience shows that any new stimulus funds (intended to reflate the U.S. consumer demand and investement) have been fleeing the U.S., with almost perfect efficiency, into inflation hedges (such as gold and oil) and even into speculative plays (such as emerging market equities). The result of three decades of magical "Reaganomics" (which the U.S. still continues to cling to as a virtual state religion) is now coming to a terrifying head. The U.S. still hasn't learned that it's quite impossible for an alcoholic to "drink himself sober." When that lesson finally hits home it will come in the form of a devestating economic (and quite possibly political) collape of the United States. I fully expect the inevitable U.S. collapse to closely resembled the collapse of the USSR in 1991 in terms of its severity and consequences.
-- Russia’s central bank said it may cut investments in U.S. Treasuries, currently valued at as much as $140 billion, a week after China said it may reduce reliance on the dollar and American bonds.Treasuries fell after Alexei Ulyukayev, first deputy chairman of Bank Rossii, said some reserves may be moved into International Monetary Fund debt. The yield on the 10-year note rose six basis points, or 0.06 percentage point, to 3.92 percent as of 8:27 a.m. in New York, according to BGCantor Market Data.
Finance Minister Kudrin said on May 26 Russia will buy $10 billion of IMF bonds from the reserves and China may buy as much as $50 billion, IMF Managing Director Dominique Strauss-Kahn said yesterday. Some investors are wary of U.S. assets because the budget deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion, the Congressional Budget Office says.
“The bigger picture is people are worried there are too many Treasuries, and that no one is even making a pretense of getting the fiscal deficit under control,” said Francis Beddington, co-founder of Insparo Asset Management, which oversees about $140 million in London.
‘Window of Opportunity’
Treasury Secretary Timothy Geithner said in Beijing on June 2 there will be enough demand for record sales of U.S. debt. He met with Chinese officials after Premier Wen Jiabao called in March for the U.S. “to guarantee the safety of China’s assets” and central bank Governor Zhou Xiaochuan proposed a new global currency to reduce reliance on the dollar.
China, Russia and Brazil are among a handful of nations that have expressed interest in purchasing the securities.
China is “actively” considering buying as much as $50 billion of the IMF bonds, the State Administration of Foreign Exchange said last week.
IMF securities would give countries a different way to contribute to the fund and are unlike traditional bonds because they pay an interest rate pegged to the IMF’s basket of currencies, known as Special Drawing Rights.
Ulyukayev said Russia will cut the share of U.S. Treasuries “because a window of opportunity for working with other instruments is opening,” according to Interfax news wire. Russia may also place more of the reserves in deposits with foreign banks, he said. The remarks were confirmed by a Bank Rossii official who declined to be named, citing bank policy.
‘Smoothly’
Maxim Oreshkin, head of research at OAO Rosbank in Moscow, said the shift into IMF debt won’t happen immediately.
“The central bank has never stood out for making fast moves with its reserves,” Oreshkin said. “If it changes certain groups it will happen smoothly.” Investing in the IMF may bring “political dividends” for Russia as it “raises the role of Russia in the IMF.”
Still, Brazil, Russia, India and China increased foreign reserves by more than $60 billion last month to limit currency gains as the first global recession since World War II restricted exports, data compiled by central banks and strategists show. Russia added the most foreign exchange since July.
President Dmitry Medvedev questioned the U.S. dollar’s future as a global reserve currency last week and said that using a mix of regional currencies would make the world economy more stable. He renewed his call for consideration of a supranational currency to challenge the dollar.
The IMF, which has rescued economies from Pakistan to Iceland in the past year, has never issued bonds and is seeking more cash to finance loans and aid to member countries during the worst economic slump in the fund’s 64-year history.
See update: Russia, Brazil Plan to Buy $20 Billion IMF Bonds
Commentary by Misha
Above: Chart showing the growth of total U.S. debt (private and public) as a percentage of U.S. GDP. Total U.S. debt began to grow dramatically around the time of the Reagan Administration, in 1981, and it has continued to soar unabated since that time. The U.S. now faces the extraordinary dilemma of choosing whether to deflate its massive debt bubble (possibly precipitating an economic crisis greater than the Great Depression) or continuing to print dollars to pump up an even larger and more dangerous bubble. Recent experience shows that any new stimulus funds (intended to reflate the U.S. consumer demand and investement) have been fleeing the U.S., with almost perfect efficiency, into inflation hedges (such as gold and oil) and even into speculative plays (such as emerging market equities). The result of three decades of magical "Reaganomics" (which the U.S. still continues to cling to as a virtual state religion) is now coming to a terrifying head. The U.S. still hasn't learned that it's quite impossible for an alcoholic to "drink himself sober." When that lesson finally hits home it will come in the form of a devestating economic (and quite possibly political) collape of the United States. I fully expect the inevitable U.S. collapse to closely resembled the collapse of the USSR in 1991 in terms of its severity and consequences.Russian Equities Continue to Surge
May 21, 2009
Above: Chart of the 2009 year-to-date performance of Russian vs. U.S. stocks. The blue line shows the Market Vectors Russia ETF Fund (which trades on the NYSE under the "RSX" symbol). In contrast the main US indexes are shown by the red (NASDAQ), Green (S&P 500) and yellow (Dow Jones) lines. As anyone can plainly see, the value of Russian equities is up some 60% for the year, while all the major U.S. indexes barely broke even. (Click on chart to view full size.)
The recent appreciation in Russian stock values means that $10,000 invested in shares of "RSX" at the start of the year would be worth $16,200 today.
Indeed, Russia now appears to be leading the mother of all market comebacks. A Bloomberg article today pointed out that even with the recent rapid appreciation of Russian stocks there's still a lot of room for further gains:
In other news, the price of gold surged above $950 today as the U.S. dollar fell to its lowest point of the year. Bloomberg also reported that Bill Gross, the co-chief investment officer of Pacific Investment Management Co., said the U.S. “eventually” will lose its AAA credit rating but that it won’t happen any time soon.
“It’s certainly nothing that’s going to happen overnight,” Newport Beach, California-based Gross said in an interview today on Bloomberg Television. “The markets are beginning to anticipate the possibility of” a downgrade to the U.S.’s top rating, he said.
Standard & Poor’s lowered its outlook on Britain to “negative” from “stable” and said the nation faces a one in three chance of a ratings cut as debt approaches 100 percent of gross domestic product. The pound fell the most in four weeks versus the dollar before rebounding, the FTSE 100 Index slid 2.8 percent and the cost of insuring U.K. debt against default rose.
Britain needs to sell a record 220 billion pounds ($349 billion) of bonds in the fiscal year through March 2010 as the economy contracts and Chancellor of the Exchequer Alistair Darling predicts that the budget deficit will reach 175 billion pounds, or 12.4 percent of GDP.
“Somebody will have to tackle the finances in the U.K., which has not been done at present,” said David Scammell, a money manager at Schroder Investment Management Ltd. in London, where he helps oversee $158 billion in assets. “The budget that we have is just unacceptable. You need a political will to deal with this enormous problem.”
See also: Russian Stock Market Zooms and Russian stocks set to take off.
Above: Chart of the 2009 year-to-date performance of Russian vs. U.S. stocks. The blue line shows the Market Vectors Russia ETF Fund (which trades on the NYSE under the "RSX" symbol). In contrast the main US indexes are shown by the red (NASDAQ), Green (S&P 500) and yellow (Dow Jones) lines. As anyone can plainly see, the value of Russian equities is up some 60% for the year, while all the major U.S. indexes barely broke even. (Click on chart to view full size.)The recent appreciation in Russian stock values means that $10,000 invested in shares of "RSX" at the start of the year would be worth $16,200 today.
Indeed, Russia now appears to be leading the mother of all market comebacks. A Bloomberg article today pointed out that even with the recent rapid appreciation of Russian stocks there's still a lot of room for further gains:
For BlackRock Inc., there isn’t a better place [than Russia] to buy emerging-market equities. The manager of $1.3 trillion has been purchasing banks and commodity producers.
BlackRock’s Plamen Monovski, Templeton Asset Management Ltd.’sMark Mobius and billionaire Kenneth Fisher are all looking past the economic crisis to buy shares trading at the lowest price-earnings ratios among the 50 major markets. They say shares will keep rising as expectations of a global recovery lift oil prices and lure overseas investors back to the largest energy exporter.
“A lot of things were priced for bankruptcy,” Monovski, an emerging-markets money manager at BlackRock, said in a phone interview from London. “All you need in Russia is a rally in commodity prices and the outlook for the economy changes pretty quickly.”
“Russian stocks are still of good value,” Singapore-based Mobius, who as Templeton’s executive chairman oversees about $20 billion of emerging-market assets, said in an e-mail. “They have risen dramatically from their low point but they are still a long way from their previous high.”
In other news, the price of gold surged above $950 today as the U.S. dollar fell to its lowest point of the year. Bloomberg also reported that Bill Gross, the co-chief investment officer of Pacific Investment Management Co., said the U.S. “eventually” will lose its AAA credit rating but that it won’t happen any time soon.“It’s certainly nothing that’s going to happen overnight,” Newport Beach, California-based Gross said in an interview today on Bloomberg Television. “The markets are beginning to anticipate the possibility of” a downgrade to the U.S.’s top rating, he said.
Standard & Poor’s lowered its outlook on Britain to “negative” from “stable” and said the nation faces a one in three chance of a ratings cut as debt approaches 100 percent of gross domestic product. The pound fell the most in four weeks versus the dollar before rebounding, the FTSE 100 Index slid 2.8 percent and the cost of insuring U.K. debt against default rose.
Britain needs to sell a record 220 billion pounds ($349 billion) of bonds in the fiscal year through March 2010 as the economy contracts and Chancellor of the Exchequer Alistair Darling predicts that the budget deficit will reach 175 billion pounds, or 12.4 percent of GDP.
“Somebody will have to tackle the finances in the U.K., which has not been done at present,” said David Scammell, a money manager at Schroder Investment Management Ltd. in London, where he helps oversee $158 billion in assets. “The budget that we have is just unacceptable. You need a political will to deal with this enormous problem.”
See also: Russian Stock Market Zooms and Russian stocks set to take off.
Arms Sent by U.S. May Be Falling Into Taliban Hands : NY Times
New York Times, May 19, 2009
The resilience of Afghanistan's Taliban insurgency may be partly due to supplies from the US, according to a New York Times investigation. The majority of 30 rifle magazines recently found on dead insurgents were the same as those issued to the Afghan military by the US, strongly suggesting that Pentagon-supplied ammo is leaking from Afghan security forces to be used against American troops.
Above: U.S.-supplied arms and ammunition recovered from Muhajadeen fighters in Afghanistan. (Click image to view full size.)
Military officials and arms experts fear that poor inventory control on the vast amount of weaponry sent to Afghanistan since 2001 means much of it could have been diverted by lax or corrupt officials. A US commander said the ammo could have come from battlefield losses, and that accountability for weapons issued to Afghan forces is a high priority
Source: NY Times
See also: Violence continues after Soviet withdrawal
The resilience of Afghanistan's Taliban insurgency may be partly due to supplies from the US, according to a New York Times investigation. The majority of 30 rifle magazines recently found on dead insurgents were the same as those issued to the Afghan military by the US, strongly suggesting that Pentagon-supplied ammo is leaking from Afghan security forces to be used against American troops.
Above: U.S.-supplied arms and ammunition recovered from Muhajadeen fighters in Afghanistan. (Click image to view full size.)Military officials and arms experts fear that poor inventory control on the vast amount of weaponry sent to Afghanistan since 2001 means much of it could have been diverted by lax or corrupt officials. A US commander said the ammo could have come from battlefield losses, and that accountability for weapons issued to Afghan forces is a high priority
Source: NY Times
See also: Violence continues after Soviet withdrawal
Italian think tank praises "Putin Plan"
May 14, 2009
The influential Italian think tank Istituto per gli Studi di Politica Internazionale (or ISPI) recently published Policy Brief #132 (May 2009) entitled The Great Transformation: How the Putin Plan Altered Russian Society.
Although Vladimir Putin is widely credited with having restored Russia to economic growth, this is but one result of the much more ambitious “Putin Plan” for the social reconstruction of Russian society through stable economic growth and a sound legal environment.
The Putin Plan originally had two phases, of which Putin managed to finish only the first, consolidation phase during his presidency. The second, reconstruction phase, currently being overseen by Dmitry Medvedev, is meant to create Russia's first truly liberal society, but its full implementation has been delayed by the collapse of the global economy.
While many challenges remain for Russia, the enormous popularity of the “Putin Plan”, especially among young people, should allow Russia to emerge from the current global economic crisis in a good position for the future.
ISPI policy brief #132 was written by Nicolai N. Petro, a Professor of Politics at the University of Rhode Island (USA). He is the author or editor of eight books on Russian politics, and has served as special assistant on Soviet affairs in the U.S. Department of State in 1989-90.
Founded in 1934, ISPI is one of the oldest and most prestigious international relations institutes in Italy, with its headquarters in Palazzo Clerici, Milan.
According to the ISPI's website, "the ISPI has become the institute that makes the biggest contribution in Italy to forming tomorrow’s diplomats (over 20% of those admitted to the diplomatic career in the last 5 years are from ISPI) as well as young people wishing to work in international organizations, both governmental and non-governmental. ISPI stimulates debate on current affairs in the global scenario (every year over 1,600 students are involved in its training activities and 20,000 people take part in the events, organized especially in Milan, Turin and Rome)."
You can also click here to see all the other ISPI policy briefs (#1-134), which cover such topics as the economic crisis in Russia, the war in Georgia and the Party of Regions in Ukraine.
The influential Italian think tank Istituto per gli Studi di Politica Internazionale (or ISPI) recently published Policy Brief #132 (May 2009) entitled The Great Transformation: How the Putin Plan Altered Russian Society.Abstract of ISPI Policy Brief #132
Although Vladimir Putin is widely credited with having restored Russia to economic growth, this is but one result of the much more ambitious “Putin Plan” for the social reconstruction of Russian society through stable economic growth and a sound legal environment.
The Putin Plan originally had two phases, of which Putin managed to finish only the first, consolidation phase during his presidency. The second, reconstruction phase, currently being overseen by Dmitry Medvedev, is meant to create Russia's first truly liberal society, but its full implementation has been delayed by the collapse of the global economy.
While many challenges remain for Russia, the enormous popularity of the “Putin Plan”, especially among young people, should allow Russia to emerge from the current global economic crisis in a good position for the future.
ISPI policy brief #132 was written by Nicolai N. Petro, a Professor of Politics at the University of Rhode Island (USA). He is the author or editor of eight books on Russian politics, and has served as special assistant on Soviet affairs in the U.S. Department of State in 1989-90.
Founded in 1934, ISPI is one of the oldest and most prestigious international relations institutes in Italy, with its headquarters in Palazzo Clerici, Milan.
According to the ISPI's website, "the ISPI has become the institute that makes the biggest contribution in Italy to forming tomorrow’s diplomats (over 20% of those admitted to the diplomatic career in the last 5 years are from ISPI) as well as young people wishing to work in international organizations, both governmental and non-governmental. ISPI stimulates debate on current affairs in the global scenario (every year over 1,600 students are involved in its training activities and 20,000 people take part in the events, organized especially in Milan, Turin and Rome)."
You can also click here to see all the other ISPI policy briefs (#1-134), which cover such topics as the economic crisis in Russia, the war in Georgia and the Party of Regions in Ukraine.
Russia may float ruble ahead of target
By Emma O’Brien and Alex Nicholson, Bloomberg, May 12, 2009
-- Russia may let the ruble strengthen at least another 6.7 percent against its exchange-rate basket this year as the country moves toward free-floating the currency before its 2011 target, the central bank’s First Deputy Chairman Alexei Ulyukayev said.
The ruble, which Bank Rossii manages against a basket of dollars and euros to limit fluctuations that hurt exporters, will be “a little stronger” in 2009, Ulyukayev said in an interview from Moscow. An advance to 35 versus the basket would be “quite reasonable” this year given the current account was $9 billion in surplus in the first four months, he added.
After allowing the currency to slump 35 percent from August versus the dollar, Bank Rossii arrested the ruble’s devaluation at the end of January by raising interest rates and curbing the loans available to banks to bet against the currency. Since then, the ruble has gained 12 percent per dollar as a 30 percent surge in Urals crude, the nation’s main oil export blend, helped lure investors back to the world’s largest energy exporter.
Above: The Russian ruble rose 12% against the U.S. dollar in recent weeks. The Russian government, fearful of harming exporters, has acted to prevent the Ruble from rising and falling too rapidly. (Click on chart to enlarge.)
The ruble jumped 0.5 percent to 37.3479 versus the dollar- euro basket by 5 p.m. in Moscow, almost 10 percent above the 41 level that central bank Chairman Sergey Ignatiev pledged to defend Jan. 22 unless Urals dropped to and remained at $30 a barrel. The currency was as strong as 32.0255 per dollar today, the most since Jan. 15, and traded as high as 43.7571 per euro. The basket is made up of about 55 percent dollars and the rest euros.
“I can hardly imagine” the ruble breaking the 41 level this year, Ulyukayev said. An average Urals price of $30 a barrel would now be a “comfortable” level for the currency and the Russian economy, he added.
Urals was little changed at $55.67 a barrel today, while crude in New York climbed as much as 2.7 percent to a six-month high of $60.08.
The ruble will be allowed to trade freely “probably sooner” than the central bank’s official target of 2011, because it is moving toward fulfilling three criteria needed to allow currency flexibility, Ulyukayev said today.
The first requirement of a current account “not too much in surplus,” already exists, though Russia still doesn’t have the “developed financial system” and technical conditions in place to manage inflation and monetary policy through interest rates, he said, referring to the other two requirements.
“Our priority is inflation and if a free float helps then we will do that,” he said.
Russia’s current account, the broadest measure of trade in goods and services, was $11.1 billion in surplus in the first quarter, according to Ignatiev.
Banks such as Nomura Holdings Inc., ING Groep NV and Barclays Plc have said the ruble’s recent strength risks eroding the competitiveness gained in the devaluation by making exports more expensive and imported goods cheaper. The current rate is still advantageous for Russian exporters, Ulyukayev said.
“We still have some room for the ruble to strengthen against the basket of currencies,” he said. “The situation is still comfortable for all market participants.”
Bank Rossii drained more than a third of Russia’s foreign- currency reserves since August, selling dollars and euros to stem the devaluation. The world’s third-largest foreign-currency holdings totaled $385.9 billion in the week to May 1, from a record $598.1 billion in the second week of August.
The central bank’s primary aim in buying dollars and euros on the currency market was to manage the currency’s advance, Ulyukayev said.
Bank Rossii purchased $8.6 billion of foreign currency last month mainly to reduce the ruble’s volatility, Ulyukayev said today. The central bank, which is currently holding Russia’s currency at a basket level around 37.35 by buying dollars and euros, is letting the market decide the ruble’s direction and is only intervening to subdue swings, he said.
-- Russia may let the ruble strengthen at least another 6.7 percent against its exchange-rate basket this year as the country moves toward free-floating the currency before its 2011 target, the central bank’s First Deputy Chairman Alexei Ulyukayev said.The ruble, which Bank Rossii manages against a basket of dollars and euros to limit fluctuations that hurt exporters, will be “a little stronger” in 2009, Ulyukayev said in an interview from Moscow. An advance to 35 versus the basket would be “quite reasonable” this year given the current account was $9 billion in surplus in the first four months, he added.
After allowing the currency to slump 35 percent from August versus the dollar, Bank Rossii arrested the ruble’s devaluation at the end of January by raising interest rates and curbing the loans available to banks to bet against the currency. Since then, the ruble has gained 12 percent per dollar as a 30 percent surge in Urals crude, the nation’s main oil export blend, helped lure investors back to the world’s largest energy exporter.
Above: The Russian ruble rose 12% against the U.S. dollar in recent weeks. The Russian government, fearful of harming exporters, has acted to prevent the Ruble from rising and falling too rapidly. (Click on chart to enlarge.)The ruble jumped 0.5 percent to 37.3479 versus the dollar- euro basket by 5 p.m. in Moscow, almost 10 percent above the 41 level that central bank Chairman Sergey Ignatiev pledged to defend Jan. 22 unless Urals dropped to and remained at $30 a barrel. The currency was as strong as 32.0255 per dollar today, the most since Jan. 15, and traded as high as 43.7571 per euro. The basket is made up of about 55 percent dollars and the rest euros.
Basket Threshold
“I can hardly imagine” the ruble breaking the 41 level this year, Ulyukayev said. An average Urals price of $30 a barrel would now be a “comfortable” level for the currency and the Russian economy, he added.
Urals was little changed at $55.67 a barrel today, while crude in New York climbed as much as 2.7 percent to a six-month high of $60.08.
The ruble will be allowed to trade freely “probably sooner” than the central bank’s official target of 2011, because it is moving toward fulfilling three criteria needed to allow currency flexibility, Ulyukayev said today.
The first requirement of a current account “not too much in surplus,” already exists, though Russia still doesn’t have the “developed financial system” and technical conditions in place to manage inflation and monetary policy through interest rates, he said, referring to the other two requirements.
“Our priority is inflation and if a free float helps then we will do that,” he said.
Russia’s current account, the broadest measure of trade in goods and services, was $11.1 billion in surplus in the first quarter, according to Ignatiev.
Competitive Edge
Banks such as Nomura Holdings Inc., ING Groep NV and Barclays Plc have said the ruble’s recent strength risks eroding the competitiveness gained in the devaluation by making exports more expensive and imported goods cheaper. The current rate is still advantageous for Russian exporters, Ulyukayev said.
“We still have some room for the ruble to strengthen against the basket of currencies,” he said. “The situation is still comfortable for all market participants.”
Bank Rossii drained more than a third of Russia’s foreign- currency reserves since August, selling dollars and euros to stem the devaluation. The world’s third-largest foreign-currency holdings totaled $385.9 billion in the week to May 1, from a record $598.1 billion in the second week of August.
The central bank’s primary aim in buying dollars and euros on the currency market was to manage the currency’s advance, Ulyukayev said.
No Targets
“We’ve never had targets on the amount of reserves,” he said. “What we have is more than enough” to maintain Russia’s debt repayments.Bank Rossii purchased $8.6 billion of foreign currency last month mainly to reduce the ruble’s volatility, Ulyukayev said today. The central bank, which is currently holding Russia’s currency at a basket level around 37.35 by buying dollars and euros, is letting the market decide the ruble’s direction and is only intervening to subdue swings, he said.
Russia to link arms control to US missile shield
RIA Novosti, May 10, 2009
Russia will link U.S. plans for a missile shield in Europe with the issues of strategic offensive armaments in relations with the United States, Prime Minister Vladimir Putin said on Sunday.
"One needn't be an expert to understand: if one party wants or would have an umbrella against all kinds of threats, this party would develop an illusion that it is allowed to do anything and then the aggressiveness of its actions will increase numerously, and the threat of global confrontation will reach a very dangerous level," Putin said in an interview with Japanese media on the eve of his visit to Japan.
Moscow has been at loggerheads with Washington over plans to deploy a missile defense system in Central Europe. The United States has signed agreements with the Czech Republic on hosting a radar station and with Poland on the deployment of 10 interceptor missiles by 2013.
Russia says the missile shield would be a threat to its national security while the United States has argued it is necessary to guard against the threat of missile attacks from states such as Iran.
Considering that the current nuclear arms reduction treaty expires this year, Moscow is ready to return to this issue and agree on a new pact, Putin said.
Russia's Foreign Ministry earlier said that the first round of negotiations between Russia and the U.S. on a new nuclear arms reduction treaty would be held in Moscow on May 18-20.
The Strategic Arms Reductions Treaty (START 1), signed in 1991, obliges Russia and the U.S. to reduce nuclear warheads to 6,000 and their delivery vehicles to 1,600 each. The treaty expires on December 5 this year.
In 2002, a follow-up agreement on strategic offensive arms reduction was concluded in Moscow. The agreement, known as the Moscow Treaty, envisioned cuts to 1,700-2,200 warheads by December 2012.
Russian President Dmitry Medvedev and his U.S. counterpart Barack Obama agreed during their London meeting in early April on an immediate start to talks on a new strategic arms reduction treaty.
Russia and the United States possess 90% of the world's nuclear weapons.
Moscow, which proposed a new arms reduction agreement with Washington in 2005, expects the United States to agree on a deal that would restrict not only the numbers of nuclear warheads but also place limits on all existing kinds of delivery vehicles.
Moscow also insists on the effective use of control mechanisms and procedures, "which the previous administration ignored categorically," according to Foreign Minister Sergei Lavrov.
Russia will link U.S. plans for a missile shield in Europe with the issues of strategic offensive armaments in relations with the United States, Prime Minister Vladimir Putin said on Sunday.
"One needn't be an expert to understand: if one party wants or would have an umbrella against all kinds of threats, this party would develop an illusion that it is allowed to do anything and then the aggressiveness of its actions will increase numerously, and the threat of global confrontation will reach a very dangerous level," Putin said in an interview with Japanese media on the eve of his visit to Japan.
Moscow has been at loggerheads with Washington over plans to deploy a missile defense system in Central Europe. The United States has signed agreements with the Czech Republic on hosting a radar station and with Poland on the deployment of 10 interceptor missiles by 2013.
Russia says the missile shield would be a threat to its national security while the United States has argued it is necessary to guard against the threat of missile attacks from states such as Iran.
Considering that the current nuclear arms reduction treaty expires this year, Moscow is ready to return to this issue and agree on a new pact, Putin said.
Russia's Foreign Ministry earlier said that the first round of negotiations between Russia and the U.S. on a new nuclear arms reduction treaty would be held in Moscow on May 18-20.
The Strategic Arms Reductions Treaty (START 1), signed in 1991, obliges Russia and the U.S. to reduce nuclear warheads to 6,000 and their delivery vehicles to 1,600 each. The treaty expires on December 5 this year.
In 2002, a follow-up agreement on strategic offensive arms reduction was concluded in Moscow. The agreement, known as the Moscow Treaty, envisioned cuts to 1,700-2,200 warheads by December 2012.
Russian President Dmitry Medvedev and his U.S. counterpart Barack Obama agreed during their London meeting in early April on an immediate start to talks on a new strategic arms reduction treaty.
Russia and the United States possess 90% of the world's nuclear weapons.
Moscow, which proposed a new arms reduction agreement with Washington in 2005, expects the United States to agree on a deal that would restrict not only the numbers of nuclear warheads but also place limits on all existing kinds of delivery vehicles.
Moscow also insists on the effective use of control mechanisms and procedures, "which the previous administration ignored categorically," according to Foreign Minister Sergei Lavrov.
Russian Stock Market Zooms
Thursday, May 7, 2009
Russia's two main stock exchanges, MICEX and the RTS, demonstrated strong share growth on Thursday, with their key indexes rising above psychologically important levels.
Russia's two main stock exchanges, MICEX and the RTS, demonstrated strong share growth on Thursday, with their key indexes rising above psychologically important levels.
Analysts say that the Russian stock market's rally can be attributed to signs of improvement in the situation on global financial markets, rising world oil prices and the return of foreign investors to Russian stock exchanges.
Above: Russia's main RTS stock index rose to 942 points on Thursday. The RTS now stands at almost double the 500-point bottom it flirted with in January and February. (Click on chart above to view full size.) The price of of Urals Blend crude, important for the Russian economy, settled in at $55 a barrel on reports of continued heavy Chinese oil buying. For the first time since the US-induced global financial crisis began last fall, the Russian stock market is now reporting significant net inflows of foreign capital.
Above: The Van Eck Russia Fund (RSX) allows US-based investors to easily and efficiently gain exposure to the Russian stock market. Shares of the Fund are bought and sold on the NYSE under the ticker symbol "RSX" and shares can be purchased through any ordinary US stock broker. The Fund invested solely in Russian equities and its performance closely mirrors that of the Russian RTS index (95% correlation). Click here to see a full listing of the Fund's Russian holdings. (Click on chart above to view full size.)
Seel also, Russian stock market set to take off.
Ukraine paying as agreed
In other financial news, Gazprom confirmed on Thursday that it had received payment from Ukraine's national energy company Naftogaz for natural gas supplied in April.
"Naftogaz has paid in full for April gas supplies," a Gazprom spokesman said.
In line with agreements reached earlier in Moscow, Ukraine must pay for each month's gas supplies by the 7th day of the following month. If payment is not made on time, then Gazprom has the contractual right to demand advance payment for Ukrainian gas deliveries.
So far this year Ukraine has made timely payments for Russian gas delivered in January, February, March and April.
Russia's cash reserves up
The Central Bank of Russia said Thursday that Russia's gold and foreign currency reserves increased by $5.3 billion, to $385.9 billion, in the week of April 24 - May 1, .
Subscribe to:
Posts (Atom)
Posts
