The committee of bond dealers and investors that advises the U.S. Treasury said the dollar’s status as the world’s reserve currency “appears to be slipping” in quarterly feedback presented to the government.
The Treasury Borrowing Advisory Committee, which includes representatives from firms ranging from Goldman Sachs Group Inc. to Pacific Investment Management Co., said the outperformance of safe-haven currencies and those from emerging nations has aided in the debasement of the dollar’s reserve status, according to comments included in discussion charts presented ahead of the quarterly refunding. The Treasury published the documents today.
“The idea of a reserve currency is that it is built on strength, not typically that it is ‘best among poor choices’,” page 35 of presentation made by one committee member said. “The fact that there are not currently viable alternatives to the U.S. dollar is a hollow victory and perhaps portends a deteriorating fate.”
Members of the TBAC, as the committee is known, which met yesterday in Washington, also discussed the implications of a downgrade of the U.S. sovereign credit rating. “None of the members thought that a downgrade was imminent,” according to minutes of the meeting released by the Treasury.
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The Swiss central bank cut interest rates today and said it will increase the supply of francs to money markets to curb the “massively overvalued” currency after it reached a record highs against the euro and dollar. The franc, considered a haven in times of turmoil, has surged 11 percent against the euro over the last two months as Europe’s debt crisis worsened. It gained 10 percent versus the greenback in that time.
The U.S. currency’s portion of global currency reserves dropped to 60.7 percent in the period ended March 31, the least since March 1999, International Monetary Fund data showed. It was 61.5 percent in the fourth quarter of 2010. The euro’s share rose to 26.6 percent, from 26.2 percent, while the yen was unchanged at 3.8 percent of the total. A category the IMF calls “other currencies” rose to 4.7 percent from 4.4 percent and is up from 3.6 percent in the first quarter of 2010.
The U.S. Treasury Department announced plans today to sell $72 billion in notes and bonds at next week’s quarterly refunding, the same as the previous refunding.
President Barack Obama signed legislation yesterday to increase the Treasury’s borrowing authority from $14.3 trillion after months of wrangling with Congress over budget cuts. The House approved the bill Aug. 1 and the Senate yesterday, the day Treasury Secretary Timothy F. Geithner warned the government would run out of power to take on more debt.
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