These days people are eagerly asking one another whether one should sell one's dollar savings to buy euros. This question worries not only a narrow circle of the rich, but also the middle class and even many of those bordering on poverty.
The great majority of Russians who can afford to save at least some money prefer to keep their savings in the U.S. currency. Over the last decade they have seen for themselves that whatever happens in this country and elsewhere in the world, the dollar's value against the ruble can only rise.
But now, for the first time in those 10 years, the dollar is reeling across our vast country, confronted by a serious challenger - the euro, which has been going from strength to strength over the last two months. According to Oleg Kuznetsov, head of the Moscow Interbank Currency Exchange (MICEX) analytical service, in June alone the dollar lost 5.4% of its value to the euro. The primary reason was the crisis phenomena in the American economy, caused by the scandals surrounding some top firms.
Second, America is enduring a period of trade deficit, with stock prices falling and capital fleeing the country. Billionaire George Soros predicts that the dollar will ultimately slide 30% against the world's leading currencies.
Against that backdrop of currency upheavals, Europe is seen to be far more stable and prosperous than America, and this impacts on the exchange rates of the two currencies.
Incidentally, global financial upheavals do not always reverberate through Russia's financial world. There have been times when the dollar took severe beatings elsewhere in the world; yet it steadily rose against the ruble. The same thing is happening now. This time, however, Russian financial institutions are keenly aware of the euro's upswing. In late spring, the notices at exchange offices showed the dollar to be two to three rubles dearer than the euro; now, their ruble prices are almost the same. What is more, on some days, at many of Moscow's exchange offices the euro's price was higher than the dollar's, albeit by a mere kopeck or two. This means that for Russian banks, which own the exchange offices, there is no psychological barrier that prevents them from selling the euro for a higher price than the dollar.
Oleg Kuznetsov says the seasonal factor too has been favoring the euro. This is the first summer when middle-class Russians can buy euros here before going on holiday to Europe. Previously, they went to European resorts with dollars in their pockets, and exchanged their dollars for euros on arriving at their destinations. Now they can buy euros with rubles at the nearest exchange office before leaving for Europe. Many have realized that this is very convenient; hence the euro's rise against the dollar.
But let us return to the question we have started this discussion with. If you have money to save, in what currency should you keep it?
Alexei Mamontov, president of the Moscow International Currency Association, advises us to follow the Central Bank's example. The bank has over $42 billion worth of gold and forex reserves. These reserves were traditionally kept in the form of precious metals, securities, and dollars. But lately, Mamontov says, the CB has diversified its reserves, investing some 10% of them in euros.
The exchange rate situation, however, should not prompt us to rush and sell all our dollars to buy euros. If you have money to save - say, 9,000 rubles, to simplify calculations - your best bet is to divide it into three roughly equal parts. Use one third of the sum to buy $100, then buy 100 euros, and keep the remaining 3,000 rubles in your ruble account. This tactic will minimize your risks, and can even lead to a growth of your savings over time.