Dollar status unlikely to be in G8 communique: G8 source

The dollar's status as the top global reserve currency is unlikely to be mentioned explicitly in the final communique at next week's Group of Eight summit, a European G8 source involved in preparations for the meeting said on Friday.

• “It is expected to be mentioned and discussed remotely. But the discussions have not yet reached the level of putting it in writing in the communiques,” the source, who asked not to be identified, told Reuters.
• G8 sources said earlier this week that China had asked for discussion of proposals for a new global reserve currency at next week’s G8 meeting in Italy.
• One source said Beijing made the request during preparatory talks about a joint statement to be issued on the second day of the summit in L’Aquila by the G8 plus the G5 (Brazil, India, China, Mexico and South Africa) and also Egypt.
• This forum, the so-called “G14,” meets on July 9 to discuss the financial crisis, trade and climate change and for the first time a G8 summit will also produce a joint G14 statement.
• “China can bring this up and they have said they would like to mention it,” the European G8 source told Reuters on Friday.
• “There may be some vague or ambiguous wording in the statement on the general issue of reserve currencies and SDRs (special drawing rights). But this (China’s request) will be something more for the G20,” he added.
• The source was referring to the meeting of the world’s Group of 20 industrialized and developing countries in the U.S. city of Pittsburgh in September.
• Canadian Finance Minister Jim Flaherty told reporters on Friday that he did not know whether the dollar’s role as the top global reserve currency would be included in the final G8 communique.
• He also defended the U.S. dollar’s role as the global reserve currency of choice, and said it had been a stabilizing force during the current financial crisis.
• The reserve currency debate centers on proposals by some emerging powers that an alternative should be found to the dollar as the main global reserve currency, to reflect the shifting balance of power in the globalized economy.
• China has been particularly vocal. It holds more U.S. Treasury debt than any other country and has expressed fears that Washington’s huge spending on economic stimulus programs could spark inflation, hurting the value of China’s dollar-denominated reserves.