International Monetary Fund (IMF) chief Dominique Strauss-Kahn said on Wednesday that a discussion over China's call for a new world currency is “absolutely legitimate” and is likely to take place in coming months.
Strauss-Kahn said that such a debate is “interesting” but isn't likely to move quickly. He says his bigger current focus is on finding a way out of the current global financial crisis, according to a report by the Associated Press.
He told reporters in Paris on Wednesday that he didn't believe the dominance of the U.S. dollar among currencies was over yet, adding: “Even the Chinese don't believe this.”
The governor of China's central bank, Mr Zhou Xiaochuan, has recommended creating a currency from a basket of currencies, controlled by the International Monetary Fund, as a way to support global economic and financial stability, the report said.
Meanwhile, Timothy Geithner, speaking at the Council on Foreign Relations in Washington on Wednesday, said that the U.S. is “open” to China's proposal.
"I haven't read the governor's proposal. He's a very thoughtful, very careful distinguished central banker. I generally find him sensible on every issue," Geithner said, saying that however his interpretation of the proposal was to increase the use of International Monetary Fund's special drawing rights (SDRs) -- shares in the body held by its members – while not creating a new currency in the literal sense.
"We're actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union," he said.
"The only thing concrete I saw was expanding the use of the (SDRs)," Geithner said. "Anything he's thinking about deserves some consideration."
The continued use of the dollar as a reserve currency, Geithner added, "depends.on how effective we are in the United States...at getting our fiscal system back to the point where people judge it as sustainable over time."
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