Treasury Secretary Timothy Geithner said on Wednesday the U.S. dollar is still the world's reserve currency and will remain so for a long time, though he also expressed openess to expanded use of an IMF currency basket.
Geithner, when asked during an audience question-and-answer period following a speech in New York, whether he foresaw a change in the dollar's global role, he said, No, I do not.
The dollar remains the world's dominant reserve currency and I think that's likely to continue for a long period of time.
He also said, as a country, we will do what's necessary to make sure we're sustaining confidence in our financial markets and in this economy's long-term fundamentals.
The comments came shortly after Geithner, in response to another question, said he was quite open to a recent Chinese suggestion to move toward greater use of a IMF-created global currency basket comprising dollar, euros, sterling and yen.
Zhou Xiaochuan, China's central bank governor, earlier this month said the world should consider the IMF's Special Drawing Rights basket as a super-sovereign reserve currency.
Geithner said he hadn't read Zhou's proposal, but added, as I understand it, it's a proposal designed to increase the use of the IMF's Special Drawing Rights. I am actually quite open to that suggestion.
He also said he had tremendous respect for Zhou. China's foreign exchange reserves are the largest in the world at nearly $2 trillion and China is the biggest holder of U.S. Treasury debt.
The U.S. dollar initially fell against the euro on Geithner's remarks regarding China's SDR proposal but pared those losses after the U.S. treasury secretary reiterated his faith in the dollar as world reserve currency.
Geithner admits to not having read China's proposal, and
President Obama's comments on the dollar yesterday -- no need for another reserve currency and that the dollar was fundamentally strong -- was more of the underlying signal, said Marc Chandler, senior currency strategist at Brown Brothers Harriman in New York.
(Reporting by Pedro Nicolaci da Costa)