The dollar’s position as the world’s leading reserve currency faces increased pressure as the financial crisis allows emerging economies greater influence on the world stage, analysts said.
A report last week in the Independent claiming that China, Russia and Gulf States are among nations prepared to ditch the dollar for oil trades has heightened the uncertainty surrounding the US currency’s future.
The dollar slumped against rivals last week in the wake of the British daily’s controversial report.
“The US dollar is being hurt by the continued talk of a shift away from a dollar-centric world,” said Kit Juckes, an analyst at currency traders ECU Group.
“Three conclusions stand out very clearly. Firstly, the shift in economic power away from the G7 economies is continuing. Secondly, there is a growing acceptance amongst those winners that one consequence of this power shift will be to strengthen their currencies.
DOWNWARD TREND
And finally, as long as the US economy is not strong enough for any rise in interest rates to be conceivable for a long time, the dollar’s underlying downtrend will remain in place,” Juckes said.
The Independent, under the front-page headline “The demise of the dollar,” reported on Tuesday that the Gulf states, together with China, Russia, Japan and France, were considering replacing the dollar as the currency for oil deals.
“In the most profound financial change in recent Middle East history, Gulf Arabs are planning — along with China, Russia, Japan and France — to end dollar dealings for oil,” wrote Robert Fisk, the newspaper’s Middle East correspondent.
They would switch “to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Cooperation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar,” wrote Fisk, citing Gulf Arab and Chinese banking sources.
The report was denied by a host of countries, including Kuwait, Qatar and Russia, while France dismissed it as “pure speculation.”
Even so, the UN itself last week called for a new global reserve currency to end dollar supremacy, which had allowed the US the “privilege” of building up a huge trade deficit.
UN Undersecretary-General for Economic and Social Affairs Sha Zukang (沙祖康) said “important progress in managing imbalances can be made by reducing the [dollar] reserve currency country’s ‘privilege’ to run external deficits in order to provide international liquidity.”
Sha was speaking at the annual meetings of the IMF and World Bank, whose president Robert Zoellick recently warned that the US should not “take for granted” the dollar’s role as preeminent global reserve currency.
Meanwhile at a G20 summit in Pittsburgh last month, world leaders unveiled a new vision for economic governance, with bold plans to fix global imbalances and give more clout to emerging giants such as China and India.
Following the summit, US Treasury Secretary Timothy Geithner repeated Washington’s commitment to a strong dollar.
SIDELINED
But last week Geithner was left to watch as traders used the Independent’s report as an opportunity to push lower the troubled US unit.
The newspaper report “has helped concentrate the minds of traders and investors alike, and has given them another excuse to take the dollar lower,” GFT Global Markets analyst David Morrison said.
“Despite what the Fed and other central bankers say, a weaker dollar is desirable because it is necessary to rebalance the global economy,” he said.
“As long as the decline is gentle and orderly, then they’re happy. But aggressive selling would spook the markets,” he said.
Commerzbank currency analyst Antje Praefcke agreed that the market’s reaction was significant because it showed that the dollar was on a downward trajectory.
“The questionable article in the Independent was of course disclaimed,” Praefcke said. “It is nonetheless an interesting study of the pscychological factors which are currently putting pressure on the dollar. Even if conspiracy theories turn out to be nonsense, the dollar is subsequently able to retrace only some of its losses.”
The government is aiming to recruit 1,096 foreign English teachers and teaching assistants this year, the Ministry of Education said yesterday. The foreign teachers would work closely with elementary and junior-high instructors to create and teach courses, ministry official Tsai Yi-ching (蔡宜靜) said. Together, they would create an immersive language environment, helping to motivate students while enhancing the skills of local teachers, she said. The ministry has since 2021 been recruiting foreign teachers through the Taiwan Foreign English Teacher Program, which offers placement, salary, housing and other benefits to eligible foreign teachers. Two centers serving northern and southern Taiwan assist in recruiting and training
WIDE NET: Health officials said they are considering all possibilities, such as bongkrekic acid, while the city mayor said they have not ruled out the possibility of a malicious act of poisoning Two people who dined at a restaurant in Taipei’s Far Eastern Department Store Xinyi A13 last week have died, while four are in intensive care, the Taipei Department of Health said yesterday. All of the outlets of Malaysian vegetarian restaurant franchise Polam Kopitiam have been ordered to close pending an investigation after 11 people became ill due to suspected food poisoning, city officials told a news conference in Taipei. The first fatality, a 39-year-old man who ate at the restaurant on Friday last week, died of kidney failure two days later at the city’s Mackay Memorial Hospital. A 66-year-old man who dined
RESTAURANT POISONING? Deputy Minister of Health and Welfare Victor Wang at a press conference last night said this was the first time bongkrekic acid was detected in Taiwan An autopsy discovered bongkrekic acid in a specimen collected from a person who died from food poisoning after dining at the Malaysian restaurant chain Polam Kopitiam, the Ministry of Health and Welfare said at a news conference last night. It was the first time bongkrekic acid was detected in Taiwan, Deputy Minister of Health and Welfare Victor Wang (王必勝) said. The testing conducted by forensic specialists at National Taiwan University was facilitated after a hospital voluntarily offered standard samples it had in stock that are required to test for bongkrekic acid, he said. Wang told the news conference that testing would continue despite
‘CARRIER KILLERS’: The Tuo Chiang-class corvettes’ stealth capability means they have a radar cross-section as small as the size of a fishing boat, an analyst said President Tsai Ing-wen (蔡英文) yesterday presided over a ceremony at Yilan County’s Suao Harbor (蘇澳港), where the navy took delivery of two indigenous Tuo Chiang-class corvettes. The corvettes, An Chiang (安江) and Wan Chiang (萬江), along with the introduction of the coast guard’s third and fourth 4,000-tonne cutters earlier this month, are a testament to Taiwan’s shipbuilding capability and signify the nation’s resolve to defend democracy and freedom, Tsai said. The vessels are also the last two of six Tuo Chiang-class corvettes ordered from Lungteh Shipbuilding Co (龍德造船) by the navy, Tsai said. The first Tuo Chiang-class vessel delivered was Ta Chiang (塔江)