The focus is on the G-8 meeting today. Leaders from the Western economic powers and Russia meet in Italy on Wednesday and are joined the day after by leaders from China, India, Brazil and others to discuss global challenges. World leaders are also bound to express the hope that the worst of the global economic crisis is passing. Apart from the comments about global economic outlook, world leaders are expected to discuss potential ‘exit strategies’ of the aggressive stimulus plans.
Moreover, the market will be eager to see if there’s a discussion about a new reserve currency. World leaders, especially from emerging markets who have held enormous amounts of USD-denominated debts, have long been requesting for another dominant currency to replace the U.S. Dollar. The most delicate issue leaders will face in economic terms is probably China’s push for consideration of alternatives to the USD as the world’s reserve currency.
The Dollar already lost a cent versus the EUR at one stage last week when after it was reported that Beijing wanted the matter debated. Still, economists have said that the greenback is still the most important reserve currency of the day, and they believe that this situation will continue for many years to come. As for the outcome of the Italy summit, FX market players are wondering whether the BRICs, or China alone, will mount a serious challenge to the Dollar. But the fact remains that with a significant global recession, it’s important to aim for stability, and stability has been based on the U.S. Dollar as the global reserve currency.
© 2006 by FxYard Ltd
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