A fairly upbeat report on the dollar-- glad that at least some of the world's bankers view U.S. currency with confidence. It's also good that high oil prices won't harm American economic growth-- that's not what I've heard, but glad to hear someone thinks so.
Re the upbeat analysis: In the back of my mind, I am remembering how Jeff Skilling and Ken Lay praised Enron stock as the rumors started to fly, and told their own employees that they should not sell and should even buy more as the price was coming down. Meanwhile, people in the know about the company's actual finances were selling out like crazy.
High Oil Prices Haven’t Impacted World Growth’
Khalil Hanware, Arab News
Hamad Al-Sayari
JEDDAH, 8 March 2005 — Top central bankers meeting in Basel, Switzerland, were generally optimistic about the world economy recording robust growth this year, Saudi Arabian Monetary Agency (SAMA) Governor Hamad Al-Sayari said yesterday. Al-Sayari said that rising oil prices had so far not impacted growth. He also said that faster US growth compared with other developed economies is positive for the dollar and further efforts to cut the US twin deficits would benefit the currency.
<snip>
“The US is the engine of growth in the industrialized world and it is way ahead of other countries in terms of economic and productivity growth. This is positive for the dollar.
If there is any policy change in (reducing) the current account and budget deficits it would be positive for the dollar,” he added. The US administration has pledged to halve the US budget deficit in five years. The world’s biggest economy grew at an annual rate of 3.8 percent in the fourth quarter, outpacing the euro zone and Japan.
Al-Sayari said central bank governors meeting at the Bank for International Settlements would discuss the world economy, with an eye on inflation risks from high oil prices.
<snip>
Central bankers are also expected to discuss the problem of global structural imbalances. The US current account deficit, currently around 5 percent of gross domestic product, has created imbalances whereby the United States sucks in imports from major economies with stagnant growth.
China has come under international pressure to revalue the yuan, pegged to the dollar since the Asian crisis in the late 1990s, to help correct the imbalances. US pressure on China to scrap its fixed currency regime reflects complaints by US exporters that it makes Chinese goods artificially cheap, swelling the US trade deficit. But asked if a yuan revaluation could solve the imbalances problem, Al-Sayari said: “No. I think China is an important region for world economic growth and it should not take hasty measures which would disrupt world growth.” China has repeatedly said it will keep the yuan stable but has pledged to promote financial sector reforms.
Al-Sayari reiterated that
the dollar still had an edge over its peers as a reserve currency. Concerns that the world’s central banks, especially in Asia and the Middle East, might diversify their foreign exchange reserves have weighed on the dollar in the past few years.
“In reserve management, central banks pursue objectives such as preservation of value, liquidity and good return. The dollar still is a dominant reserve currency,” he said.<snip>
http://www.arabnews.com/?page=6§ion=0&article=60118&d=8&m=3&y=2005