Monday, February 15, 2010Saudi backs dollar as reserve currency
JEDDAH: The Saudi central bank chief yesterday defended the US dollar's role as the world's main reserve currency and rejected calls for the International Monetary Fund's SDR to be given reserve status.
However, he said the euro is growing in importance and supported eventually diversifying reserve currencies.
"The dollar is still preeminent in its role as a reserve currency," said Mohammed Al Jasser, the head of the Saudi Arabian Monetary Authority.
"The dollar has not been meaningfully challenged since The Second World War," he said.
Jasser said the SDR - the IMF's Special Drawing Rights - serves few of the functions necessary to be an acceptable global reserve currency, such as offering opportunities as an investment medium or being used in settling trade.
China, which has huge exposure to the crisis-weakened dollar in its trade and reserves, has called for an enhanced role for the SDR but Jasser said that 'would take years'.
"It is unrealistic that it could provide the solution," he said.
Saudi Arabia, the world's second largest oil producer, is overwhelmingly dependent on dollar-denominated oil exports for state revenues.
The country holds nearly $400 billion in foreign reserves, mostly dollar-denominated.
Jasser said that although it is still far behind the dollar and faces challenges, the euro is slowly becoming a key reserve currency.
"A multi-polar system is the ideal and I think the euro is moving in that direction.
"The European currency still lacks depth and liquidity as an investment instrument, but should gain a greater role eventually.
"They (the Europeans) need it, we need it, everybody in the world needs it," Jasser said.
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