China ‘Super Currency’ Call Shows Dollar Concern, G-20 Ambition

[dkf]

March 25 (Bloomberg) -- China’s call for the creation of a new international reserve currency may signal its concern at the dollar’s weakness and ambitions for a leadership role at next week’s Group of 20 summit, economists said.

Central bank Governor Zhou Xiaochuan this week urged the International Monetary Fund to create a “super-sovereign reserve currency.” The dollar weakened after the Federal Reserve said that it would buy Treasuries and the U.S. government outlined plans to buy illiquid bank assets.


Yuan’s Status

China is promoting use of the yuan to smooth currency volatility and to serve “a long-standing interest” to raise its status to that of a global reserve currency, said Ben Simpfendorfer, an economist at Royal Bank of Scotland Group Plc in Hong Kong. Such moves are not “a knee-jerk response” to the economic crisis, he said.

“If turning the Chinese yuan into a global reserve currency sounds ambitious, then encouraging its adoption as a regional reserve currency is more straightforward,” said Simpfendorfer.

Hong Kong Chief Executive Donald Tsang said yesterday that he was “all for” a common Asian currency to reduce volatility and help trade, adding that if countries as diverse as Greece, Spain and Ireland can share the euro, “there’s no reason why Asia cannot come together.”

Such a move would have to wait until China removed restrictions on converting the yuan, Tsang said at a conference in Hong Kong.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aoTbWSDDY19Y&refer=worldwide

[napi21]

1. They're posturing. The US dollar will remain the currency of trade.

That won't change unless everything Obama is doing fails, and I don't see that happening.

[dkf]

2. Everyone ran to the dollar because the Euro started looking unstable.

I find it interesting that Asia could be looking at a common currency though. Its the first time I've heard this being mentioned.