Saudi endorses dollar as reserve currency

JEDDAH - The Saudi central bank chief believes the US dollar will remain the world's key foreign reserve currency, offering the endorsement at a meeting of business leaders taking stock of the global financial crisis.

Leaders at the Jeddah Economic Forum also discussed the growing role of emerging market economies in helping steer the world through its worst recession in more than six decades.

"The dollar is still pre-eminent in its role as a reserve currency," said Mohammed al-Jasser, governor of the Saudi Arabian Monetary Agency.

Even so, as an official reserve currency, the euro was gaining ground, he told the conference in Jeddah.

The remarks offer another indication that even with the wide fluctuations in the US currency over the course of the global meltdown, suggestions put forward last year by China for a new international reserve currency have yet to gain serious traction, at least in the Gulf region.

Saudi Arabia, like most other Gulf Arab nations, pegs its currency to the dollar, and trade in its chief export - oil - is also in dollars.

Al-Jasser dismissed as untenable the idea of using the International Monetary Fund's Special Drawing Rights - a quasi-currency used by the IMF in its dealings with member governments - as an international reserve currency.

China has in the past pushed for using SDRs as an alternative to the dollar, largely on fears that its extensive foreign reserves were being hit hard by the weakness in the US currency.

Saudi Arabia's foreign currency reserves, which exceed US$400 billion, are largely held in dollars.

The kingdom is also a driving force behind efforts to set up a unified Gulf currency. It, with Kuwait, Qatar and Bahrain, is pushing ahead with the plan while Oman and the United Arab Emirates, home to debt-saddled sheikdom Dubai, say they will not take part.

Among the issues to be discussed at the conference are steps to reform the world financial order and how to avoid the mistakes that helped bring about the recession.

- AP