The Esperanto currency
Hiroshi Watanabe, president of the Japan Bank for International Cooperation, saw his share of dollar buying intervention during decades at the nation’s finance ministry. But the market veteran says despite prevalent talk recently, a shift away from the greenback as the world’s reserve currency may be great in theory, but like the language of Esperanto short on daily practitioners.
“Esperanto is a very good language, but no community uses it in its daily life, ” Watanabe told the Reuters Japan Investment Summit.
“That’s the same situation that applies to the currency… I don’t see any other currency that can take the position to replace the key U.S. dollar.”
China, Russia and Brazil intend to push at this week’s Group of Eight summit for a new global reserve currency as an alternative to the dollar.
G8 sources say they do not expect serious debate by world leaders on the issue, which potentially could affect the value of trillions in dollar-denominated assets held by world nations, including China and Japan.
The euro, a basket of currencies like the IMF’s Special Drawing Rights (SDRs), or even the not-fully convertible yuan have been touted as future replacements.
Watanabe says this will not happen any time soon, although he notes a loss of dollar sheen.
“The dollar should remain the key currency for the time being, but we have to admit that the dollar is over its peak,” he said.
“SDRs can be used for book-keeping the liability of an asset by the IMF of World Bank… but in the case of settlement, it is not so easy to use that kind of hypothetical unit.”
Photo credit: REUTERS/Toru Hanai