Dollar drops as Geithner sees greater role for IMF currency

Mar 25, 2009, 16:38 GMT

Washington - US Treasury Secretary Timothy Geithner sent the US currency tumbling Wednesday by saying he was open to enlarging the International Monetary Fund's currency reserves, but rallied again as he clarified the dollar will remain 'the world's dominant reserve currency.'

His comments at the Council on Foreign Relations in New York were in response to China's suggestion that a new global currency reserve replace the dollar in order to guard against fluctuations in economic crises.

China's central bank head on Tuesday proposed a 'gradual increase' in the IMF's special drawing rights - a currency unit weighted against a basket of global currencies - and eventually replacing the dollar as the world's global reserve currency.

After rejecting the idea on Tuesday, Geithner told the council the United States was 'actually quite open' to increasing the IMF's special drawing rights.

The dollar dropped 0.7 per cent against the euro in response, but rallied again after Geithner clarified his remarks at the same conference about 30 minutes later.

'I think the dollar remains the world's dominant reserve currency. I think that's likely to continue for a long period of time,' Geithner said.

President Barack Obama on Tuesday flatly rejected China's call for a global reserve currency, an idea that has also been suggested by Russia.

'I don't believe that there's a need for a global currency,' Obama said at a White House press conference Tuesday night, adding that the dollar 'is extraordinarily strong right now.'