The U.S. dollar should remain the global reserve currency, says a senior Chinese finance official.
Guo Shuqing, chairman of China Construction Bank and former head of the country’s foreign exchange administrator, said he has concerns about an idea to replace the dollar with a “super-sovereign reserve currency,” reported the Financial Times.
The proposal was floated by China’s central bank governor, Zhou Xiaochuan.
“In the short term I don’t think we can find another currency to replace the U.S. dollar,” said Guo. “The US dollar is the main currency because their economy is number one in terms of competitiveness, in terms of innovation.”
The “super-sovereign reserve currency” would be based on special drawing rights that is issued by the International Monetary Fund.
Guo dismissed the concept, saying it was not practical.
“We’ve had SDRs for many years but everybody knows they don’t work so well,” said Guo. “People worry about U.S. dollars very much because of the imbalances in the current account but that has been the case for many years — they have had a deficit in the current account since the very beginning of the 1970s.”
The majority of China’s total international investment position is currently in U.S. dollar assets.
The U.S. dollar dropped to its lowest level since mid December with news of strong housing sales. Investors are retreating from seeing the dollar as a safe haven.
"The overall sentiment in the market remains dollar negative," said Vassili Serebriakov, senior currency strategist at Wells Fargo, Reuters reported.
"This whole story about a financial market recovery and stabilization of the global economy has encouraged people to take on more risk and buy commodity currencies essentially against the U.S. dollar."
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