U.S. President Barack Obama and his top two economic officials on Tuesday dismissed suggestions by emerging economic powers that the world move away from using the dollar as the world's main reserve currency.
I don't believe that there's a need for a global currency, Obama told a prime-time televised news conference, adding that the dollar is extraordinarily strong right now.
The International Monetary Fund said earlier that the single global currency idea highlighted concerns about the stability of the global financial system, after both China and Russia earlier urged an overhaul of the global monetary system.
In a congressional hearing on Capitol Hill, U.S. Rep. Michele Bachmann, a Minnesota Republican, asked U.S. Treasury Secretary Timothy Geithner: Would you categorically renounce the United States moving away from the dollar and going to a global currency as suggested this morning by China and also by Russia, Mr Secretary?
Geithner replied, I would, yes.
She posed the same question to Federal Reserve Chairman Ben Bernanke, who said: I would also.
Chinese central bank chief Zhou Xiaochuan on Monday urged a wider use of Special Drawing Rights created by the International Monetary Fund as a global reserve asset in 1965.
Zhou's comments followed remarks by Russia last week which said it would put forward a proposal at a meeting of the Group of 20 in London on April 2 for the creation of a new global reserve currency.
Russia said its proposal had broad support among other key emerging market economies including Brazil, India, China, South Korea and South Africa.
Obama was asked during his news conference about concerns expressed by Chinese officials over the dollar, the growing U.S. budget deficit and the safety of Beijing's $740 billion holdings in U.S. Treasury debt.
He answered by saying that U.S. dollar strength reflected growing confidence in America's prospects and in steps taken by his administration to revive the economy and shore up housing and the financial system.
The reason the dollar is strong right now is because investors consider the United States the strongest economy in the world with the most stable political system in the world, he said.
You don't have to take my word for it. I think that there is a great deal of confidence that ultimately, although we are going through a rough patch, that prospects for the world economy are very, very strong.
Australia's Prime Minister Kevin Rudd also knocked down the global currency idea, telling a Washington audience late on Monday that the dollar's position as the reserve currency remains unchallenged.
IMF TAKES LONG VIEW
IMF First Deputy Managing Director John Lipsky said on Tuesday that while the discussion about a new reserve currency was not a new one, it underscored a general concern about the strength of the world's economic and financial system.
These kinds of discussions of alternative reserve currencies have been around a long time, some very serious people have proposed them, but I don't think any of them are considered a near-term option, he told Reuters Financial Television in an interview.
It's a very complicated and big proposition but it is part of a natural conversation about how the stability and effectiveness of the current international system can be strengthened, Lipsky said.
He earlier told a news conference the discussion of changes in IMF lending instruments and the reserve currency idea should not be dismissed outright.
It's a serious proposal and I don't think even the proponents think of it as a short-term issue but rather a long-term issue that merits serious study and consideration, Lipsky added.