MarketNews

By   Andrey Biryukov  and Anna Andrianova

• Wealth fund FX mix to be changed in 2020 to match reserves

• Finance Min. may buy more euros for budget-rule FX purchases

Russia is planning to cut the dollar’s share in its $125 billion sovereign-wealth fund, following a major move last year out of U.S. assets by the central bank.

“Geopolitical risks are one of the key factors for changing the structure of reserves,” Deputy Finance Minister Vladimir Kolychev told reporters Wednesday. “I can say for sure that the share of the dollar will be reduced and other reserve currencies will be considered, including the yuan and those of other countries.” The change will take place next year, he said.

The Finance Ministry would consider conducting more of its regular purchases of foreign currency for the wealth fund in euros, in place of some of the dollars it currently buys, he added.

President Vladimir Putin has pushed for Russia to reduce its dependence on the dollar as the U.S. has tightened sanctions over the last few years. The Bank of Russia last year dumped $100 billion of its dollar holdings last year in favor of euro and yuan. The diversification made Russia the biggest holder of yuan reserves globally.

Heavy on Euro

The Bank of Russia has moved away from the dollar

Source: Bank of Russia as of March

The National Wellbeing Fund, held by the central bank as part of its reserves, grew to $124.5 billion in October thanks to a steady inflow of oil revenues. At present, the fund is about 40% dollars, 30% euros and 6% British pounds.

Dollar Reigns

The Finance Ministry wants to lower dollar share in its wealth fund

Source: Finance Ministry as of Oct. 2019

“The central bank can satisfy the ministry’s request to change the currency structure without conducting operations on the market as it has considerable amount of foreign currency,” said Dmitry Dolgin, chief economist at ING Bank. “I this the actual sale of dollars at the local market is unlikely.”

The central bank’s reserves total $542.9 billion.

“The wealth fund is a part of the country’s international reserves, that is why we want to match the central bank,” Kolychev said

The central bank didn’t respond to a request for comment.

(Updates with charts.)