Dollar rises

Wednesday, June 17, 2009

NEW YORK: The US dollar rose broadly on Monday after Russia expressed confidence in the greenback as the world's reserve currency, while concerns about the euro zone economy undermined the euro. The single European currency fell below $1.38 to its lowest level in more than three weeks after the European Central Bank said euro zone banks will probably need to write down another $283 billion.

Speaking on the sidelines of a Group of Eight finance ministers meeting in Italy, Russian Finance Minister Alexei Kudrin said the dollar's role as the world's main reserve currency is unlikely to change in the near future. The comments followed statements from a top Russian central bank official last week that it would cut the share of US Treasuries in its reserves. But Kudrin's comments alleviated concerns that major emerging market countries may be diversifying away from the dollar ahead of a summit of leaders of Brazil, Russia, India and China (BRIC) in Russia on Tuesday.

"Reserve diversification has really come into question given the complete U-turn in the comments from the Russian finance minister," said Kathy Lien, director of currency research at GFT Forex in New York. "We have started the new trading week on a dollar-friendly tone."

The International Monetary Fund on Monday also threw its support behind the US unit, saying the dollar's status as the world's dominant reserve currency is likely to remain. "Markets have been increasingly concerned about the status of the US dollar," said Camilla Sutton, senior currency strategist at Scotia Capital in Toronto. "It's fairly clear to most people there's no alternative."


(BRecorder)