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Uncertainty over the value of the US dollar is the key risk for global economy in 2011 with US dollar index (USDX) surpassing 80, says a Chinese official.
USDX is a measure of value of the US dollar relative to a basket of foreign currencies such as euro, pound, Canadian dollar, Swedish krona, Swiss franc, and Japanese yen.
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While most of the currencies appreciated against the dollar, euro and pound were depreciated, said Chinese Securities Journal quoting He zhicheng, senior commissioner, China Agriculture Bank.
However, He said that there is little chance of US facing credit crisis, despite the fact that some municipal governments might go bankrupt which may impress the yield of US treasury bonds.
He also expected that the Federal Reserve might alter its quantitative easing (QE) project much before anticipated.
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If the US economy shows positive signs of growth, particularly the banking sector and unemployment, the Fed would resort to sudden change in monetary policy, discontinuing the QE, he said. He expects the dollar to appreciate in May or June drastically.
Further he added that the European Central Bank, Bank of England and Bank of Japan have no incentive to increase interest rates in 2011.
