Euro in the world and in Russia
by Olga Butorina, Moscow State Institute of International Relations
Functions of international currency
Money function
Medium of exchange Unit of account Store of value
Private use
Invoice & vehicle currency Quotation currency Investment currency
Official use
Intervention currency Pegging currency Reserve currency
Euro and Dollar in the world
World trade in USD Foreign holdings of bank deposits in USD Official reserves, 2001 Forex deals - USD, 2003 Forex deals – EUR, 2003 W RF 52 80 60 65 95 30 90 75 98 19
Sources: IMF, CLS, EC, ECB, Bank of Russia
Russia’s aims
• decrease dollarization $60 bln cash • diversify currency structure of foreign trade & trans-border settlements • decrease Forex risks
European Union’s aims
• euro - international currency • invoice currency in energy trade • euro - regional foreign currency (Europe, Mediterranean, French Africa, Russia, CIS countries)
Opportunities
• alternative to the dollar • deals with the rest of Europe and Mediterranean • better access to EU financial markets
Challenges
• rooted dollarisation • small depth of euro-ruble market • higher volatility of exchange rate (managing float – USD) • wider spreads • exports of raw materials
Daily sport forex trading in Russia, 2003 (bn USD)
5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 EUR GBP JPY CHF
Daily sport forex trading in Russia, 2003 (bn USD)
25 000 20 000
15 000
USD EUR
10 000
5 000
0
Cash transactions in euro,
monthly volumes bn EUR
600 500
400 bought sold turnover 200
300
100
-
ja n. 20 0 m 2 ar ch m ay ju ly se p no t. v ja em n. . 20 0 m 3 ar ch m ay j se uly pt em no . ve m .
USD and EUR/DM cash spreads 2001-2003 (%)
10
0
1
2
3
4
5
6
7
8
9
ja n2 00 1 m ar ch m ay ju ly se p no t. ve ja m . n. 20 02 m ar ch m ay ju ly se p no t. v ja em n. . 20 03 m ar ch m ay j se uly pt em no . ve m .
Daily official rates in Oct-Dec
2003 (rubles per 1 USD and EUR)
39 37
35
33
USD EUR
31
29
27
BRL ARS
.
JPY
DKK
USD
AUD
EUR
CHF
SGD
RUR
BGL
Dollar domain
Euro domain
Conclusions
• Euro is good for external operations, no internal euroisation • No reasons to join EU and Eurozone • Ruble in Russia and CIS • Euro in gas trade, than – in oil • High XR volatility in future, new risk management is needed