DOMINANCE OF DOLLAR CONCERNS AT G8 MEETING - One world leader has already left the G8 gathering in Italy. China, though not a member of the G8, like many other countries does attend. China is a major developing economy and along with G8 member Russia and other countries like Brazil, has been calling for the dollar to be replaced as the main global reserve currency in the build-up to today's meeting. The issue is not on the formal agenda but any debate on the status of the dollar is a sensitive matter in global financial markets.
Ulster Bank chief economist Simon Barry says a reserve currency is one in which the international authorities and the main central banks choose to hold their foreign exchange reserves in. During the last few decades, the US dollar has retained its dominant position as the world's major currency of choice. This also reflects the fact that in the private sector, outside of the central banking sector world, the dollar is used substantially for invoicing in international trade.
The economist says the Chinese and Russians are concerned about the dollar being the world's main reserve currency because of their growing trade surpluses. They have seen a rapid accumulation of their foreign exchange reserves to the point where they are now significant holders of US financial assets. In fact, Mr Barry says their dollar denominated holdings are probably excessive. They are worried about what US policy might do to the value of the dollar, which they hold so much of.
The economist says there is really no short-term alternative to the dollar, despite China and Russia's desire to replace it with something else. He says it is not practical to come up with some initiative that will suddenly replace the dollar as the reserve currency of choice.
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MORNING BRIEFS - Oil remained under $63 a barrel in Asian trade today amid rising concerns that a recovery from the worldwide recession was unlikely to happen soon. New York's main contract, light sweet crude for August delivery, was down 63 cents to $62.30 a barrel, extending sharp falls in US trade overnight. Brent North Sea crude for delivery in August eased 58 cents to $62.65. New York crude has lost more than $11 and Brent over $10 since June 30 when prices for both contracts rose to more than $73 dollars a barrel, their highest levels this year.
*** Tullow Oil has released a trading update in advance of half year results. The company, whose stock market value is more than twice as much as AIB and Bank of Ireland combined, says its outlook remains very positive. The company is best known for its exploration activities in Africa, especially in Ghana where it says it has finalised a development plan with the government there for its Jubilee Field to produce oil from next year.
*** On the currency markets, the euro is worth $1.3901 and 86.37 pence sterling.
