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currency moves elevated in 3Q21 thanks to lower seasonal buffers and the persistent execution of the fiscal rule. However, better sentiment towards the EM, after adjustments of expectations to higher DM rates, could pave the way for the currency to strengthen towards RUB/$70.2 by YE21, we think.
5.2.4 Gross international reserves
Russia’s gross international reserves fell by about $14bn from $605.2bn in May to $591.5bn as of the end of June.
Russia’s efforts to remove dollar assets from its National Wealth Fund (NWF) has resulted in $2 billion in losses. Last month, the Ministry of Finance took 20% of the liquid part of the fund comprising its dollar assets, amounting to $39.8 billion, and purchased other currencies. The dollars were used to buy yuan, euros, and open a metal account with the Central Bank for 340.5 tons of gold. The purchases resulted in a doubling of the amount of yuan in the NWF bringing the fund to 30% yuan, 40% euro, and 20% gold. The yuan has since fallen by 1.8%, the euro by 3.7% and gold by 7%. The fund, which supports Russia’s pension system, decreased from 12.1% of GDP to 11.7% of GDP, or 13.6 trillion rubles ($182.57 billion). Russian authorities have been attempting to reduce their dependence on the dollar to insulate themselves from the risk of the tightening of U.S. sanctions.
65 RUSSIA Country Report August 2021 www.intellinews.com