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Russia sells currency reserves to defend ruble

The Central Bank of Russia (CBR) has shown a two-week loss in its gold and foreign currency reserves for the first time this year.

Reserves held in Moscow fell to $413.8 billion on August 24th, a loss of $900 million on its previous value.

Russian daily the Kommersant suggested a possible reason for the decline to be an aggressive intervention strategy by the central bank in order to prevent ruble depreciation.

The country's sell-off widened the gap between its foreign exchange reserves and leading global reserves in China and Japan, with Chinese holdings now exceeding $1.33 trillion, mostly in US Treasury debt.

The loss of Russian reserves comes after the surprising sale of $4 billion by the CBR on August 21st, fuelling fears that the ruble requires strengthening due to the effects of the US sub-prime mortgage crisis on investors' attitudes toward risk.

Investors have looked to central banks for guidance as the global credit crisis unfolds, but no clear direction has yet emerged. It is as yet unclear whether Russia's reserve sales included any sale of gold, which closed August trade in London more than 4% higher for the year-to-date.

The week to August 17th showed a decline in global central bank holding of gold by €26 million ($35 million), with the possibility remaining of banks not selling the full quota of gold permitted this year by the Central Bank Gold Agreement.

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