Freezing Moscow’s forex reserves may dethrone greenback, strategist says

Freezing Moscow’s forex reserves may dethrone greenback, strategist says

Cutting Russia off from accessing its foreign currency reserves may end the hegemony of the US dollar, according to Credit Suisse short-term interest rate strategist Zoltan Pozsar.

“Imagine a response on the back of this, where a lot of exporters of whatever commodities and widgets decide to invoice things in a different currency,” Pozsar told Bloomberg’s Odd Lots podcast.

“Because all these dollars you’re earning and all this money you keep in the West is at risk,” the expert said, adding that nations that have joined the China-led Belt and Road Initiative (BRI) may invoice the goods in yuan.

“You can see new financial centers by invoicing a bunch of trade in a different dominant currency and there’s all sorts of reasons to that now,” Pozsar said.

The analyst added that markets that are currently dominated by the euro and the dollar would clearly feel the impact of the move over time.

The US, Japan, and the EU barred the Central Bank of Russia from tapping a significant part of its forex reserves held abroad, in response to the country’s invasion of neighboring Ukraine.

The unprecedented step doesn’t cut Russia off from its foreign currency entirely. The embargo still allows Russia to use it for energy payments and the country is still able to access its reserves held domestically and in China.

However, the measure, along with other economic penalties, sent the Russian ruble plummeting this week, with the central bank unable to provide support for the currency, while the country’s’ financial markets were thrown into turmoil.

For more stories on economy & finance visit RT's business section

Source: www.rt.com

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