Canada defends U.S.$ as global reserve currency

Fri Jul 3, 2009 1:36pm EDT
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By Louise Egan

OTTAWA (Reuters) - The U.S. dollar as the global reserve currency of choice has been a stabilizing force during the current financial crisis, Canada said on Friday, downplaying calls to debate the greenback's dominant status.

Canadian Finance Minister Jim Flaherty added his weight, at least for now, to Japan's opposition to a Chinese push for a new super-sovereign reserve currency that would displace the U.S. dollar.

Flaherty also told reporters he could see the Canadian currency appreciating as part of a worldwide shifting of foreign exchange rates to correct imbalances.

He said he did not know whether the U.S. dollar's role as the global reserve currency would be included in the final communique of a meeting between the Group of Eight leaders and a heads of emerging nations in Italy next week.

"It's an issue that we have not addressed other than to say that, in the midst of what is still a significant global recession, it's important that we aim for stability, and stability has been based on the U.S. dollar as the global currency," Flaherty said via teleconference from Chile.

China has asked for a debate on a new global reserve currency by the G8 and five emerging economies, G8 sources have told Reuters. News of the Chinese request helped push the U.S. dollar down to a three-week low on Wednesday.

Flaherty said he expected there to be a more general discussion on foreign exchange at next week's summit, which starts with the G8 nations alone and then broadens to include emerging nations.

Commenting on Canada's currency, he said there was room for the Canadian dollar to appreciate further as part of the global realignment of currencies that many believe should include a rise in the Chinese yuan and a weaker U.S. dollar.   Continued...

<p>Canada's Finance Minister Jim Flaherty speaks during the "Hemispheric Responses to Global Economic Instability" conference in Santiago July 2, 2009. REUTERS/V&iacute;ctor Ruiz Caballero</p>