25 March 2009

Rudd spruikes US dollar

don't beleive anything until its been officially denied a few times......

Rousing endorsement . . . Kevin Rudd leaves the Australian ambassador's residence in Washington, before his meeting with Barack Obama, inset. Photo: Andrew Meares
Phillip Coorey in Washington and Jacob Saulwick
March 25, 2009

KEVIN RUDD has scotched suggestions by the governor of the People's Bank of China that the US dollar should lose its status as the world's key reserve currency.

The call by the governor of the central bank, Zhou Xiaochuan, for the creation of a new world currency has added spice to the lead-up to next week's G20 meeting called to find co-ordinated solutions to the global financial crisis.

The Prime Minister, whose approach to the crisis was branded "A-plus" yesterday by the Obama Administration, said the currency issue was not on the agenda of the G20 meeting in London.

"The dollar's position on that score remains unchallenged," he told a Wall Street Journal seminar in Washington. "It's not on my agenda papers and if there's a late Chinese edition I'll review it with respectful interest."

Russia already has proposed the G20 examine the creation of a new reserve currency and reportedly has the backing of a growing number of nations.

Mr Rudd, who held talks with the US President, Barack Obama, overnight Sydney time, is conscious of China's growing importance and backs its push at the G20 to increase its stake in the International Monetary Fund.

Mr Rudd said there was a chance the Chinese economy, on which so much of the world depends, could start recovering by the second half of this year.

He told the seminar public stimulus measures and private administrative changes under way in China might "give the rest of the world a bit of a surprise on the upside in the second half of the year. Everyone around the world is waiting for China to come alive … It's too early to tell but there's a few green shoots out there."

Mr Zhou's proposal, which economists consider unlikely to succeed, points to nervousness in China about $US2000 billion ($2840 billion) invested in the US, and a growing willingness to throw its weight around in international affairs.

"To me it is a case of dream on - it isn't going to happen," said Mervyn Lewis, a professor of finance at the University of South Australia.

Professor Lewis said the comments reflected China's frustration that by buying US government bonds, it was having to pay for the US attempt to spend its way out of the financial crisis.

The comments follow remarks by the Premier, Wen Jiabao, this month that he was worried about China's investments in the US, and his call for prudence on the part of the US Government. If the US dollar falls, it will dramatically reduce the worth of China's national savings.

Mr Rudd's approach to the financial crisis received a rousing endorsement from the US Treasury Secretary, Timothy Geithner. He told the Journal seminar that Mr Rudd was "incredibly A-plus" on responses to the global crisis. "If we did what he advised, we'd all be in a better place," Mr Geithner said.

Today Mr Obama will unveil proposals to tighten financial regulations.

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