Russia keeps buying gold and Chinese yuan, which may hurt the dollar

Russia is taking measures to protect itself against future sanctions from the European Union and the United States, says RT news.

The Russian Central Bank’s response to the rising pressure from Western economic sanctions has been to increase gold reserves and diversify away from the dollar and euro. Currently Moscow controls the world’s 5th largest foreign exchange reserves and the 6th largest gold reserves.

To protect itself from risks involving U.S. dollars and euros, in light of the ongoing crisis in Ukraine, Russia has cut its foreign currency reserves by 2.5 percent in the first half of 2014.

Rather than buying euros and dollars, the Russian central bank is now increasing bilateral currency swaps with China and other strategic trade partners. China’s central bank has agreed last week to increase currency swaps with Russia’s central bank.

Ebbing dominance of the U.S. dollar has worsened since the global financial crisis, and Russia’s measures to deal with the Western sanctions may accelerate its demise as the world’s reserve currency.

Global reserves of U.S. dollars has shrunk to under 61 percent from the 72 percent in 2001, according to Bloomberg, and since the global financial crisis Russia and other big emerging economies have promised to use their own currencies to conduct business.

Sources:

Russia seeks safe haven in gold, away from dollar and euro

Russia Sanctions Accelerate Risk to Dollar Dominance

Image by Prime Minister of Russian Federation