Dollar slumps further as Russia talks ‘new world currency’
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The dollar is taking another big hit today, as traders latch onto Russia’s threat to pursue the idea of a new world currency to replace or supplement the greenback.
With the dollar already badly battered this spring as the world’s appetite rises for riskier investments, momentum traders who are shorting the buck are gleeful over any news that helps keep the bearish trend in place.
The euro has zoomed to $1.433 today, its highest level in 2009 and up from $1.417 on Monday. The British pound has jumped to $1.658, a seven-month high and up from $1.644 on Monday.
From Bloomberg News:
Russian President Dmitry Medvedev may discuss his proposal to create a new world currency when he meets counterparts from Brazil, India and China this month, Natalya Timakova, a spokeswoman for the president, told reporters by phone today. Medvedev first proposed seeking alternatives to the U.S. dollar as a reserve currency in March.
China, too, has raised the idea of creating some kind of global currency that could ease the world’s dependence on the dollar. Any nation with huge holdings of dollar-denominated securities fears what a meltdown of the greenback would mean for its own financial well-being.
Treasury Secretary Timothy F. Geithner is in China this week looking to shore up Beijing’s support of record U.S. borrowing this year to fund the financial-system and economic bailouts.
Still, a replacement for the dollar as the world’s reserve currency obviously isn’t going to materialize anytime soon -- a fact acknowledged by Guo Shuqing, chairman of China Construction Bank and former head of the country’s foreign exchange administrator, in an interview in the Financial Times today.
‘In the short term I don’t think we can find another currency to replace the U.S. dollar,’ Guo said.
As for Russia’s idea, ‘it took decades for the euro to be established,’ Jack Spitz, a managing director for foreign exchange at National Bank of Canada in Toronto, told Bloomberg. ‘I can only imagine how long it would take for the BRIC countries to put together a currency.’
U.S. purchasing power dwindles as the dollar slides, but it’s great news for American exporters (their products get cheaper for foreign buyers) and for Americans with investments abroad.
-- Tom Petruno