Russia warms up BRICS summit to buy IMF bonds

In the run-up to the first BRICS summit next week, Brazil and Russia said in Wednesday that they would buy 10 billion of billions of dollars in new securities from the International Monetary Fund, and Russia planned to dump US Treasuries.　　The US dollar index fell to 79.483 per cent on the day, with 10-year Treasury yields rising to a new high of nearly 4% per cent in the year. "With more opportunities to use other investment instruments and a clearer picture of foreign banks, we plan to gradually reduce our holdings of US Treasuries," he said.　　Alexei Ulyukayev, deputy governor of the Russian Central Bank, also stressed that Russia will not immediately sell US Treasuries and will gradually replace them with other assets when the bonds expire. Brazil's finance minister, Mantega, said Brazil would lend to the IMF in the form of buying IMF bonds, not deliberately suppressing the dollar. "Brazil will use some of its foreign exchange reserves to provide this financing so that the IMF can help developing countries." "IMF bonds are likely to be denominated in special drawing rights (SDRs) to find new ways of investing in BRIC countries with large foreign-exchange reserves." China is also considering buying, in addition to the 10 billion of dollars pledged by Russia and Brazil.　　Analysts expect India to announce purchases of bonds close to Brazil's and Russia's commitments. Issuing bonds will find new sources of financing for the cash-strapped IMF.　　The IMF has been designing a bond since January to meet some of the country's central banks ' demand for additional capital. The purchase of IMF bonds is not just about allocating foreign exchange reserves to the BRIC countries, but more so, as Mantega has said, to win a bigger say in the IMF. "The IMF cannot ignore Brazil's views, which will give us moral authority to push the reforms needed by the IMF."　　"said the Brazilian president, Lula da Silva. Since the global financial crisis intensified last year, developing countries have been concerned about the dominance of the dollar's reserve currency. By borrowing heavily to deal with the recession, the US could reduce the dollar's status and undermine the value of developing countries ' foreign exchange reserves. The volatility of the dollar is now the most feared issue, with developing countries holding large amounts of dollar-denominated foreign exchange reserves. Among the BRIC countries, China is the world's largest foreign exchange reserves, with Russia, India and Brazil being the third, fourth and seventh.