Sunday, September 13, 2009

AS Greenback slides, US official talks up the dollar at world economic forum

       The US government is concerned about overall demand for Treasuries, not appetite from individual countries, said david Dollar, the US Treasury Department's economic and financial emissary to China.
       "The interest rate on long-term treasury bonds is at a very low level by historical standards," Dollar said yesterday at the World Economic Forum meeting in Dalian, China.
       "That says that the market has confidence the US will get the fiscal problem under control."
       Chinese Premier Wen Jiabao said in March that the Asian nation was "worried" about the safety of its investment in US debt, as a weakening dollar erodes the value of its record US$2.1 trillion (Bt68 trillion) of foreign-exchange reserves.
       President Barack Obama is relying on China to sustain buying of Treasuries amid record amounts of debt sales to fund a %787-billion stimulus spending package.
       Treasuries of all maturities have lost 2.88 per cent so far this year, after returning 14 per cent in 2008, indexes from Merrill Lynch show.
       The Dollar Index, which tracks the greenback against the currencies of six major US trading partners, fell yesterday to the lowest level since September, 2008.
       Chinese investors have doubled their holdings of US government bonds in the past three years to $776 billion as of June, acording to Treasury data.
       Diversification of currency reserves by China "makes some sense" due to their huge scale, said Dollar, who was formerly the World Bank's country director for China and Mongolia and ws named emissary to China in June.
       "It is healthy to have a veriety of different reserve-type of currencies," he said.
       In an interview with Bloomberg Television, Dollar said that countries still favoured holding reserves in dollars because of the breadth of the US market.
       "The US dollar happens to be the best choice," he said. "It is one of the few very good places where you can put large amounts of assets and have confidence of their future value."
       People's Bank of China governor Zhou Xiaochuan urged the International Monetary Fund in March to create a "super-sovereign reserve currency" to replace the dollar.
       The goal is to have a currency "disconnected" from individual nations and one that remains stable in the long run, Zhou said.
       Ten-year Tresuries yielded 3.34 per cent yesterday compared with the year's high of 4 per cent reached in June. The 30-year bond offered 4.28 per cent, dropping from its June peak of 4.84 per cent.
       Dollar said the US welcomes foreign investment, but it is not especially dependent onthat to fund its fiscal deficit. He said the shortfall is about 10 per cent of the nation's economy.

       The People's Bank of China governor urged the International Monetary Fund to create a super-sovereign reserve currency to replace the dollar.

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