* Gold now makes up nearly 10 pct of foreign reserves
* Russia the world's 4th-largest reserve holder
* CBR views paper assets as risky - Ulyukayev
* Ulyukayev has accused Japan of monetary protectionism
(Adds Putin spokesman on c.bank selection)
By Darya Korsunskaya
DAVOS, Jan 24 The Russian central bank will
continue to buy gold as it seeks to diversify its foreign
reserves away from paper assets it views as risky, First Deputy
Chairman Alexei Ulyukayev said on Thursday.
The Bank of Russia has built up the world's fourth-largest
foreign reserves, worth $530 billion, by buying oil export
dollars to keep the rouble competitive. The hoard includes two
rainy-day budget funds that guard against fiscal shocks.
The bank has also been a bullion buyer and the share of gold
in its reserves is approaching a medium-term target of 10
percent, raising questions over whether it would keep buying
Ulyukayev, speaking during the World Economic Forum, said
the central bank would continue to buy gold, but gave no
indication on whether there would be any change in the share of
its reserves it allocates to the precious metal.
"We are buying metal and will continue to pursue this
course," Ulyukayev told reporters in Davos.
"This is a course of asset diversification in a situation
when investing in securities or deposits remains risky."
Russia's central bank is undertaking a shift from a managed
float of the rouble to inflation targeting, which is leading it
to scale back its accumulation of forex via market interventions
as it fine-tunes interest rate policy.
But the government wants to bolster its ability to withstand
economic shocks, and will transfer $30 billion in surplus
revenues from last year to its fiscal Reserve Fund, meaning that
the central bank's reserves will grow.
WHERE'S THE YEN?
Ulyukayev oversees the Bank of Russia's asset management and
is viewed as a contender to take the helm when Chairman Sergei
Ignatyev retires in June. He dodged a question when asked
whether President Vladimir Putin had chosen him for the job.
"It's good that he's made up his mind - better an end to the
horror than horror without end," joked Ulyukayev, a liberal
economist who has published his own book of poetry.
The Kremlin dismissed reports that Putin had already made up
his mind. "The process continues, but not as actively as some
are writing - there's still plenty of time," Dmitry Peskov told
Reuters. A candidate should be chosen in March.
Ulyukayev, 56, has weighed into an intensifying debate over
the 'currency wars' that have broken out as advanced economies
pursuing aggressive monetary stimulus in a bid to grow their way
out of a debt trap.
He recently accused Japan of "protectionist monetary policy"
and, detailing the current composition of the central bank's
foreign exchange reserves, he made no mention of the yen.
According to a breakdown given a year ago, the central bank
held 1.6 percent of its forex reserves in yen. It was not
immediately clear whether or when that position had been sold.
Russian bankers in Davos said, meanwhile, that it would make
sense for the central bank to expand its allocation to gold.
Another source familiar with the central bank's thinking
said, however, that there were no plans to change the 10 percent
share. Russia's central bank bought 80 tonnes of gold last year,
and it plans to buy a similar amount in 2013.
At the end of last year, the central bank held nearly 950
tonnes of gold, worth some $51 billion, its figures show.
It owned 400 tonnes of gold at end of 2006 and the price of
the yellow metal has since rallied by $1,000 as the
regulator bought up around half of Russia's gold mining output.
BREAKING IT DOWN
Giving a breakdown of the currency portion of Russia's
foreign reserves, Ulyukayev said the U.S. dollar accounted for
46 percent and the euro 40.5 percent.
Sterling has a 9 percent share, the Canadian dollar 3
percent and the Australian dollar, added to Russia's
reserves last year, at 2 percent.
Separately, he said that inflation could exceed 7 percent in
February but should start to ease from March onwards. Consumer
inflation reached 6.6 percent in 2012.
He saw no grounds for further monetary stimulus but left
open the direction of the central bank's next interest-rate
move. "It could be one way or the other," he told reporters.
(Additional reporting by Alexei Anishchuk; Writing and
additional reporting by Douglas Busvine; Editing by Toby Chopra)