In neither scenario does it make sense to hold huge amounts of dollar denominated assets today. Therefore, foreign speculators should, any day now, dump their dollar denominated assets onto the market, and so bring about the dollar decline that they so fear.

While China s government should make greater efforts to rebalance the economy by conventional measures, it also should focus more attention on adjusting the currency structure of the country s gross assets and gross liabilities. In particular, China should try to replace its dollar denominated assets with renminbi denominated assets, and its renminbi denominated liabilities with dollar denominated liabilities.

For the US, the fundamental cause of imbalances is not a strong dollar, but America s over consumption and over borrowing. A strengthening dollar would worsen the US trade balance, but a weakening dollar could cause panic in capital markets, which might push up risk premia on dollar denominated assets, including US government securities, in turn leading to an economic slowdown and a further weakening of the dollar.

Thus, while a significant proportion of expenditure is denominated in euros, some dollar expenditures remain.

The actual budget increase cannot be determined simply by noting a change in the dollar denominated amount.

Second, China s foreign assets are denominated almost exclusively in US dollars, while its foreign liabilities are denominated mostly in renminbi. As a result, whenever the US dollar declines, China s net international investment position (the difference between its external financial assets and liabilities) deteriorates and so does its investment income balance.

US Dollar

In November 2001, the authorities again restructured the public debt, this time exchanging dollar denominated bonds for domestic guaranteed loans.

But perhaps the strongest message is being sent via targeted sanctions on Russia s oil, finance, defense, and technology industries, as well as on Russian officials. With this approach, the US and its allies are sending a clear message to anyone who may disagree with US policy avoid using the dollar and dollar denominated bank accounts.

But foreign currency speculators and international investors are not looking forward to either of these scenarios. They continue to hold very large positions in dollar denominated assets, which they would not do if they thought the US faced a choice between a cheap dollar and a deep depression.

The public sector was at the time running a broadly balanced budget, although government expenditure was partly funded by short term dollar denominated bonds (tesobonos).

LONDON Ten years on, the euro is a resounding success. A financial market heavyweight, it now outperforms the dollar, the yen, and, until recently, the mighty Chinese yuan, while euro denominated bond trading rivals the US market in size.

Expanding local currency bond markets could expedite a shift from dollar denominated cross border loans to local currency loans, bringing benefits to both investors and borrowers.

Annex I, table 1 US dollar statements

8 One Bermuda dollar (B 1.00) is equivalent to one United States dollar (US 1.00).

With rebalancing will come a decline in China s surplus saving, much slower accumulation of foreign exchange reserves, and a concomitant reduction in its seemingly voracious demand for dollar denominated assets. Curtailing purchases of US Treasuries is a perfectly logical outgrowth of this process.

China has recycled about 60 of these reserves back into dollar denominated US government securities, because it wants to limit any appreciation of the renminbi against the world s benchmark currency. If China bought fewer dollars, the renminbi s exchange rate up 35 against the dollar since mid 2005 would strengthen more sharply than it already has, jeopardizing competiveness and export led growth.

For example, WIPO's budget is denominated in Swiss francs and UNIDO's regular budget is denominated in euros.

The external deficit of the United States is financed mainly by Central Banks that invest their foreign exchange reserves in dollar assets, for which euro denominated assets represent a serious alternative.

This fear of a stronger dollar is the real reason for concern, bordering on panic, in many emerging economies and at the IMF. A significant strengthening of the dollar would indeed cause serious problems for emerging economies where businesses and governments have taken on large dollar denominated debts and currency devaluation threatens to spin out of control.

The exchange rate was approximately Rp 9.000, to One US Dollar.

America depends on China s trade surplus and savings to finance its outsize budget deficits, while China relies on its huge exports to the US to sustain its economic growth and finance its military modernization. By plowing more than two thirds of its mammoth foreign currency reserves into US dollar denominated assets, China has gained significant political leverage.

Expenditures for staff costs and maintenance of the premises mainly denominated in euros have been translated into United States dollars in April 2002 at an average euro to dollar exchange rate of 0,8636.

Domestically oriented macroeconomists look at the situation roughly like this at some point in the future, foreign central banks will become less willing to continue buying massive amounts of dollar denominated securities in order to prop up the greenback. When they cease their large scale dollar purchase programs, the value of the dollar will fall and it will fall hard.

Development related investments accounted for 12 per cent of the Fund apos s assets at book value, with about 43.8 per cent of these holdings denominated in currencies other than the United States dollar.

Of course, an earlier attempt was made to create a commercial market in SDR denominated claims. Back in the 1970 s, there was some limited issuance of SDR denominated liabilities by commercial banks and SDR denominated bonds by corporations.

Select the currency in which this account is denominated.

The policy of making an allowance of 10 per cent of non United States dollar denominated outstanding accounts receivable as at 31 December as a provision for delays in the collection thereof, is discontinued effective 31 December 2003.

So it is very likely that when the global economy has returned to a sort of normality and safe haven demand has declined, the prices of US government securities will fall and their yields will rise. As a result, China s dollar denominated foreign exchange reserves, which account for the largest share of all the foreign holdings of US government securities, will suffer interest rate losses.

Acquisition security rights include those that are denominated as security rights, as well as those that are denominated as retention of title, arrangements and financial leases.

A sharp weakening of the euro towards parity with the US dollar, which is unlikely, as the US is weak, too.

At present the official rate of exchange is 14.00 Dominican pesos to one US dollar.

Expenditures and the resulting changes shown in the fund balances of these accounts are due solely to the revaluation at current rates of exchange of the outstanding claims that are denominated in currencies other than the United States dollar.

In 1988 the Governing Body recommended and the International Labour Conference subsequently approved the adoption of a system of assessments denominated in Swiss francs combined with the forward purchase of the United States dollar expenditure requirements of the budget.

b Total public debt denominated in pesos and foreign currency.

During the 1997 1998 Asian financial crisis, East Asia s economies paid heavily for excessive accumulation of dollar denominated debts. Because governments failed to defend their currencies, they lost hundreds of billions of dollars in foreign exchange reserves to international speculators.

A fluctuating US dollar placed additional pressure on projected expenditures to the end of the year.

The third factor is the vicious circle of oil prices and the value of the US dollar. Higher oil prices increase America s trade deficits, which in turn lower the value of the dollar. Owing to the inverse relationship between oil prices and the dollar, the weaker dollar increases oil prices, which increases the trade deficit further, putting more downward pressure on the dollar.

For instance, it is estimated that for every dollar Mexico receives from migrants abroad its GDP increases by US 2,69 to US 3,17.

But the foreman was kind enough to give us each a check for a dollar, but my mother would never let us cash it.

The decline in the North American market has been partly offset by higher than expected revenues in the European market due to the increased demand for dollar denominated publications, as well as the increase in sales in the New York and Geneva bookshops.

Triffin issued his warning more than 50 years ago, but it has recently gained traction, as China s rise has made the world increasingly disinclined to tolerate the instability caused by a dollar denominated system. The solution, however, lies not in replacing the dollar with the renminbi, but in strengthening the role of the world s only truly global currency the IMF s Special Drawing Rights.

The value of loans denominated in renminbi CN 188 billion ( 29.2 billion) is tiny, especially when one considers that almost 50 of total international banking liabilities are denominated in dollars, approximately 30 in euros, 5 in pounds, and about 3 in yen. And the renminbi accounts for 0.6 1 of global foreign exchange reserves held by central banks, whereas the dollar and the euro account for 62 and 23 , respectively.

In fact, while the US dollar depreciated during the last half of 2003 resulting in huge exchange gains in 2003, during the first five months of 2004, the US dollar appreciated by 3 per cent against the euro and other major currencies.

Expenditure on consultants and experts is denominated in both euros and dollars.