Building and managing currency reserves in the new world
( A version of the following article appeared in Business Standard on March 28, 2022, per link below: https://www.business-standard.com/article/opinion/building-currency-buffers-in-the-new-world-122032700842_1.html ) Building and managing currency reserves in the new world In February 2022, Bank of Russia (BOR, Russia's central bank) seemed prepared for severe financial sanctions from the USA. BOR had grown its foreign exchange war chest from USD 350 bn in 2015 to USD 643 bn in December 2021. As of June 2021, it held just 7% of its assets in the United States. Instead, it denominated 32% of its reserves in EUR, 22% in Gold, and 13% in Chinese Yuan. However, in the aftermath of Russia's military strike on Ukraine, in a breathtaking show of unity, the western world froze BOR’s access to its reserves in all major currencies including the US Dollar, Euro, Pound Sterling, Japanese Yen, and Australian Dollar. BOR now finds that much of its reserves are inaccessible. Between this