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US top economic chiefs dismiss reserve currency idea

US's top 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.

world Updated: Mar 25, 2009 12:38 IST

US's top 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.

Meanwhile, the IMF said the idea highlighted global 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, US Rep Michele Bachmann, a Minnesota Republican, asked US 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.

Australia's prime minister Kevin Rudd also knocked down the idea, telling a Washington audience late on Monday that the dollar's position as the reserve currency remains unchallenged.

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, 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.