Bloomberg is reporting that the strength of the US dollar improved on July 2 after a Chinese government official voiced support for a stable dollar and said he "was not aware" of any plans to discuss a new global currency at the upcoming G8 meeting.
China's vice foreign minister He Yafei was quoted as saying, "We hope that as the main reserve currency the exchange rate of the U.S. dollar will be stable. This international financial crisis has fully exposed the weaknesses and loopholes in the international monetary system."
This voice of support for the greenback may not be shared by everyone in Beijing. It was only on June 29 that the Wall Street Journal cited the People's Bank of China as saying, "To avoid the shortcomings of sovereign credit currencies acting as reserve currencies, we need to create an... international reserve currency that can maintain the long-term stability of its value."
One of China's main concerns is that while US monetary policy may be suitable for helping the domestic US economy, global investors in the dollar may end up subsidizing policies that are not optimal for their home markets.
So while the issue may not be discussed at the upcoming G8 meeting, it will be discussed nonetheless.
