Due primarily to soaring commodity prices and a strong economy, Russia has amassed the third largest stock of foreign exchange reserves in the world, now totaling $268 Billion. As a result, when Russia announced that it would begin to hold some of its reserves in Yen, forex traders stopped to listen. Previously, Russia’s reserves were denominated in USD and Euro assets. As the Yen is arguably the most undervalued currency in the world, it makes sense from both a financial and risk management standpoint. The Financial Times reports:

While the news was positive for the yen at the margin, it would be wise for investors not to overreact, given the global context in which central banks have been consistently reducing the share of yen in their foreign exchange holdings.

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